PROFILE:BERNARD MADOFF rose to prominence on Wall Street by raising money from people who in many cases were largely like himself – New Yorkers, often based in the Long Island suburbs, with ties to the city's financial and business community.
Madoff (70) was a member of the club, if there is such a thing, in New York.
A past chairman of the Nasdaq stock market, he was considered an innovator in the world of exchange trading and was a well-known presence in the world of charities and country clubs in New York and its satellite communities in Florida.
Many of his investors had been with Madoff for decades. He won their allegiance with steady returns of about 10 per cent, year in and year out – what seemed like a perfect investment for older financial professionals.
It was a measure of Madoff’s appeal that, when news of his arrest hit well-heeled Palm Beach, Florida, one of his investors – a retiree from New York who had put $20 million (€15 million) in Madoff’s hands – sought treatment from his cardiologist rather than advice from a financial professional, according to one of his relatives.
Madoff’s reputation had been as a hedge fund manager who was good for your blood pressure – although his consistency now seems to have been a red flag.
There were always those on Wall Street who questioned his success.
“It seemed a black box,” says the head of one boutique investment firm in New York. “I spent the 1990s being sceptical but, after 20 years, I was ready to be a believer. I thought it was inconceivable to keep this kind of Ponzi scheme going for 20 years.”
Madoff’s investors, in many cases, considered themselves fortunate to put money with him. Often, they inherited their stakes from their parents.
His message was that the fund was closed but, because they came from the same world or were related through an uncle of his accountant, or some other such connection, he would take their money.
He also set up advisory councils with distinguished members, which he then invited into his funds.
“Dealing with him was all about getting behind the velvet rope to get into a downmarket bar,” says Fabio Savoldelli, chief global strategist at Optima Fund Management. “His entire fund was structured around a cult of access.” – (Financial Times service)
