Vast Under-Investment in Due Diligence
With everyone tsk-tsking the Madoff scandal -- the amount lost, the after-the-fact obviousness, the SEC incompetence -- I thought now was as good a time as any to look at the actual research, due diligence and manpower thrown at investigating managers and funds.
Not surprisingly, it is tiny -- at least, when compared with the heavy lifting of equity research. The asset management and brokerage industry is vastly under-invested in due diligence; the resources applied to hedge funds and managers is a comparative pittance.
Note that every major brokerage firm -- from Merrill Lynch to UBS to Morgan Stanley to Credit Suisse and beyond -- offer a platform to these managers. Their managed assets group, private wealth management, (even retail brokerage) have access to these funds and managers.