France persists in externalising hedge fund dilemma

... somehow around half of the onshore French funds of funds were exposed to Bernard Madoff. Why was that? It comes down to the French desire for bond-like returns, and their love affair with quantitative analytics. We use quants extensively in our work, but they are more relevant for some investments than others. At the extreme, a precipice bond illustrates the difficulty of using past returns to determine future risk. But the payoff profile of a conventional bond is similarly asymmetric. This is why Peleton got an award for risk adjusted performance, as judged by the Sharpe ratio just before it blew up.

Put simply, the French were just relying on the numbers and the ticked boxes instead of doing due diligence. And they are externalising the problem instead of putting their own house in order.