Swiss Private Bank Liquidates Fund Hit By Madoff

Rachel Walsh

19 February 2009

Swiss private bank Reichmuth & Co is closing a fund-of-hedge fund hit by the alleged pyramid scheme of Bernard Madoff, with plans to open a new vehicle.

In a letter to investors the bank said the Swiss banking regulator had rejected it's proposal to create a "side pocket" - a separate portfolio for illiquid fund assets - for the Reichmuth Matterhorn fund.

A spokesman for the regulator was not immediately available to comment to WealthBriefing.

The Matterhorn fund, the bank explained, was hit by liquidations or gates and suspensions of hedge funds it invested in, as well as higher redemption demands from Reichmuth's clients. Roughly 50 per cent of the fund's assets will be returned in April, with the remainder continuing quarterly until the end of 2010, the letter continued.

The Lucerne-based private bank said the new fund is being offered to qualified investors only, and will be launched "in due course."

At September 2008, the Matterhorn fund volume amounted to approximately $4.4 billion

In a similar development last month, Luxembourg financial supervisors, the Commission de Surveillance du Secteur Financier, said they were terminating the LuxAlpha hedge fund that invested heavily in the funds of the Bernard Madoff scheme.

LuxAlpha was promoted by custodian Swiss bank UBS and was one of 16 Luxembourg-based funds that lost at least €1.7 billion ($2.2 billion) as a result of the alleged fraud of Mr Madoff.