Pruning Investment Dangers

Amaranth, Long-Term Capital, and Madoff Investment Securities were all hedge-fund accidents waiting to happen. And all gave off visible warning signs that investors could have seen. So argues the Greenwich Roundtable in "Avoiding Mistakes". The nonprofit education group highlights 22 case studies of unnamed, failed hedge funds and shows how to recognize signs of impending doom. Some red flags: an inadequate track record, lack of independent valuation, poor risk management, multiple marketing firms, and hard-to-understand strategies. Investors should also be sensitive to signs of managers' emotional immaturity and character flaws.