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From First Avenue Partners` Bryan Go: The Madoff Fraud is bound to have investors running from hedge funds. However, one should realize that Madoff was not structured as a typical hedge fund. The Madoff structure was unique, and allowed ample latitude for fraud. Madoff is not representative of the hedge fund industry.

Investors in Madoff:

• Did not buy shares in an offshore entity advised or managed by Madoff.
• Did invest in an offshore entity which in turn placed funds in a brokerage account.
• Had the said brokerage account held at Madoff Securities.
• Therefore had their assets custodied, managed, executed and reported and reconciled by Madoff Securities.
• Ceased having an independent source of information and were thus vulnerable to fraud among other things.

The typical hedge fund is structured as follows:

• investors buy shares in an offshore entity.
• the entity would appoint an independent custodian to hold its assets.
• the entity would appoint an independent administrator to manage it on a day to day basis, such management to include the calculation and determination of the gross and net asset values.
• an investment manager would manage the assets of the entity.
• the investment manager would execute trades through independent third party brokers.
• the investment manager would not be able to operate the bank accounts of the company or limited partnership without the involvement of the t......................

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