The Brown Daily Herald – Several colleges and universities are sustaining large financial losses in the aftermath of Bernard Madoff’s $50 billion hedge fund scam.

Madoff defrauded investors by using money collected from new investors to pay off existing ones – an illegal strategy known as a Ponzi scheme after the man who developed it. The entire scheme collapsed when Madoff was unable to find new investors to continue paying his clients, the New York Times reported Dec. 12.

Yeshiva, Tufts and New York Universities and Bard College had all invested with Madoff before his scheme was revealed late last year. NYU was hit hardest, losing $24 million dollars. Tufts lost $20 million, Yeshiva $14.5 million and Bard $3 million, according to the schools’ respective media relations offices.

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Daily Herald – Year after year, the hedge fund industry dazzled Wall Street by delivering "absolute returns" – outsized profits whether markets rose or fell. Using sophisticated trading models, the pools of managed capital made wealthy people wealthier with eye-popping returns that carried seemingly moderate risk.

Not these days. Blind-sided by a colossal market collapse and the widening Bernard Madoff scandal, hedge funds suffered their worst showing on record last year. And they’re bracing for more pain in 2009. The industry’s fall proves that even the quantitative brilliance and market wizardry of elite hedge funds are no magic bullet for investors during brutal times.

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Tags: absolute-returns, bernard madoff, brilliance, daily herald, elite, investors, magic bullet, market collapse, models, moderate-risk, pools, profits, scandal, wall street, wizardry