Re: BRINKS HOME SECURITY MAY HAVE DIRECT TIES WITH MADOFF

[mleuck <m.leuck@xxxxxxxxx>]

On Jun 30, 11:23=A0am, Jim Rojas <jro...@xxxxxxxxxxxx> wrote:
> noauth wrote:
> > NEW YORK (Fortune) -- Not quite rich enough and not quite smart enough,=
 a certain investing class has for years paid through the nose for what was=
 thought to be world-class money management by investing in funds that prom=
ise access to the best hedge funds.
>
> > The Bernard Madoff scandal now calls into question the value of the so-=
called fund-of-fund industry.
>
> > A fund-of-funds manager puts clients' money to work in a portfolio of h=
edge funds or other non-traditional investment vehicles.
>
> > The client gets access to accounts he wouldn't normally have access to =
but the expenses are exorbitant: often a 1% management fee and between 5% a=
nd 15% of any gains.
>
> > That might feel okay when the fund is turning in stellar performance, b=
ut not so much when they're losing money, or worse, investing in a fraud.
>
> > "The fund-of-funds community has a problem because they're a step remov=
ed from the actual investment of money," says Michael Lewitt, president of =
hedge fund Harch Capital Management. "To convince people they add value the=
y sell themselves as offering diversification, due diligence and access to =
exclusive hedge funds. The Madoff scandal hits at the heart of this model, =
and could be devastating for the industry."
>
> > Indeed, some advisors seemed to do little more than turn over most or a=
ll of their clients' money to Madoff -- money that may now be gone.
>
> > "The fact that very well respected fund-of-fund names like Fairfield Gr=
eenwich and Maxam Capital Management were funding a ponzi scheme for a peri=
od of decades blows up the raison d'etre for a fund-of-funds," said Lewitt.
>
> > Before the Madoff scandal broke, the average fund-of-funds had been str=
uggling with the same negative trends slamming the average hedge fund -- in=
vestors pulling money out, poor performance and lots of volatility.
>
> > And the average fund-of-funds is down about 19% this year, underperform=
ing hedge funds by about 2 percentage points.
>
> > "Even before these numbers came out, investors were beginning to realiz=
e that these two layers of fees made their chances of making money pretty r=
emote," said Steve Cesinger, the chief financial officer at private equity =
and real estate investment firm Dewberry Capital.
>
> > According to CNBC, Fairfield is planning to sue Madoff, claiming that i=
t was a victim of fraud and that it did due diligence and hired auditors.
>
> > "It is clear that there will be extensive litigation around this scanda=
l and that fund-of-funds managers will be exposed to that litigation," said=
 Steve Thel, a law professor at Fordham law school where he teaches securit=
ies regulation.
>
> > But Thel said such suits against funds of funds will address two main q=
uestions. First, did the fund managers conduct reasonable due diligence. An=
d second, did they disclose to investors that they were not diversified.
>
> > Given that some prominent fund-of funds turned down Madoff it's hard to=
 argue that proper research was conducted. As for whether proper disclosure=
s were made, "that's still to be discovered," said Thel.
>
> With the small budget Brinks operates on, I doubt it.
>
> Why would a company spend millions of dollars on advertising, when they
> can just lower their rates and get more client referrals that way?
>
> All they are doing is keeping rates high. Their overhead must be choking
> them beyond belief. ADT doesn't need to advertise that much, or nor do
> they resort to using scare tactics like Brinks does.
>
> Jim Rojas

That is not the way it works, advertising is a drop in the bucket
compared to incoming revenue, stopping advertising wouldn't
necessarily give them the ability to reduce monitoring rates. You can
hope all you want but they ARE a profitable company with relatively
low attrition and now are independent with no debt. That may or may
not change with the new name but that remains to be seen.

ADT on the other hand isn't bringing in enough new accounts to make up
for attrition losses