So what was Madoff investing in?

The name Madoff is now indelibly associated to the largest financial
scam of history. Nevertheless, it's interesting to see what types of
investments had Madoff's favors and that's what a columnist of the FT
did. Fairly interesting piece although I'm not certain you should immediately try to replicate Madoff's approach because this stuff smells like insider trading. Yet another indication of the degree of corruption that plagued parts of the financial system that is collapsing before our eyes and inflicting damage on many people who neither benefited, not supported it.

clipped from www.ft.com

It looks like Mr Madoff (or whoever chose the stocks in his fund) liked to get involved in various special arbitrage situations. Some of these still exist and make for interesting stock picks.

Mr Madoff played a lot of special-purpose acquisition company arbitrage: SPACs trading below cash.

Hicks has $540m in cash and a market capitalisation of $480m. Trading below cash makes this a very safe play.

Anheuser-Busch, which has since been acquired. When Mr Madoff bought the stock he had a potential 40 per cent annualised return implicit in it because of the arbitrage going on with Anheuser-Busch being acquired by InBev. The deal closed in November so Mr Madoff made his money.

Mr Madoff also liked “closed end fund arbitrage”: buying closed end funds trading at significant discounts to their net asset value

Finally, Mr Madoff was a big believer in financial media. One of his new positions in the third quarter of 2008 was a little stock called thestreet.com, founded by CNBC’s Jim Cramer.