Were investors led to bad money manager by newsletter?

Jason Szep of Reuters writes Wednesday about how The Wall Street Digest, an investment newsletter, ran a headline in 2003 that read “America’s Top Ranked Money Manager” about Arthur Nadel, who has now vanished with $350 million of his client’s money.

Its editor, Donald Rowe, and the newsletter are now being questioned for the amount of due diligence they do on money managers.

Szep writes, “Rowe wrote in the Wall Street Digest in 2003 that he conducted a due diligence visit to the office of Nadel and his business partner, Neil Moody, who has said he was not aware of any problems until last week.

“‘I did not learn the various mathematical formulas in Nadel’s ‘black box’ computer program,’ Rowe wrote.

“‘What I did learn is very important for the individual investor. After 26 years of reviewing the track records of over 11,000 mutual funds, 6,000 money managers and 5,800 hedge funds, Nadel’s computerized investment program has produced the best track record and most consistent returns I have ever seen,’ Rowe wrote.

“‘The highly technical program used by the group is proprietary, but I was given an opportunity to see it in action during a due diligence visit to their office,’ he wrote.

“Fine print at the bottom of the report notes that Rowe from time to time makes referrals to The Nadel Moody Group. Experts say that while such referrals could pose a conflict of interest there is little regulation over investment newsletters.”

Read more here.