In 2006 MPI ran analysis on the Fairfield Sentry Fund, one of the primary feeder funds to Bernard Madoff’s strategy, and came to the conclusion that, most likely, the returns were fabricated. After an exhaustive returns-based quantitative analysis failed to explain the fund’s consistently positive returns, MPI then discovered that the highest correlating factor was the return stream of a proven fraud-the Bayou fund. CEO and Director of Research Michael Markov writes about this revelation, the impact of Madoff’s fraudulent returns on hedge fund indices and the need for due diligence in the investment community.