Santander, Spain’s biggest bank, has blocked public access to the website of its Optimal hedge fund management arm after telling investors in a US equities subfund they face potential losses of €2.33bn ($3.29bn) in the allegedly fraudulent securities operation run by Bernard Madoff in New York.
The website of Swiss-based Optimal, which had more than $10bn under management at the end of 2007 for institutions and wealthy individuals, had boasted at length about its fund managers’ close attention to risk control and due diligence.
“Intensive due diligence is vital to ensuring the integrity and sustainability of the investment process . . . Each investment undergoes lengthy and detailed scrutiny according to clearly defined manager selection criteria,” the website, seen on Sunday by the Financial Times, said before it was blocked. Yesterday it simply said: “New website to be launched soon.”
Spanish investors alone may have lost as much as €3bn as a result of the suspected fraud, Madrid-based investment advisers and bankers said yesterday.
The heavy exposure – disclosed losses continued to mount yesterday as new investments came to light – has aroused resentment among investors towards the banks and mutual funds that sold products linked to Mr Madoff.
Numerous Spanish investors have been hit, although it remains unclear how many were persuaded by friends on golf outings to invest with Mr Madoff on the basis of his reputation as a shrewd manager, and how many bought hedge fund products marketed by banks without knowing of his existence.
“Picking off Spain’s wealthiest was like clubbing seals,” said one business consultant who asked not to be named yesterday.
The information sheet for Santander’s Madoff-invested Optimal Strategic US Equity fund, which charged a 2.15 per cent management fee, makes no mention of Mr Madoff or his operations and says the fund “invests in US large cap stocks that are in the S&P 100 universe”.
The minimum investment was $50,000.
“The fantastic thing is that you know for a fact that they couldn’t have done the due diligence because Madoff didn’t allow for the possibility,” said one London-based European banker whose father had money invested in the fund. Santander declined to comment yesterday on whether Optimal had recently conducted due diligence at
Santander said €2.01bn of Optimal’s exposure to Mr Madoff was for its institutional and international clients, while the remaining €320m was for private banking customers in Spain.
The close links between members of the Spanish business elite were underlined by the revelation by M&B Capital Advisers that it had direct and indirect exposure client exposure to Mr Madoff of €152.4m.
M&B Capital Advisers is part of a group linked to the family of Emilio Botín, Santander chairman. M&B was founded by Guillermo Morenés, Mr Botín’s son-in-law, and his son Javier Botín.
The Comisión Nacional del Mercado de Valores, the Spanish stock market regulator, has amassed details of 224 investment funds and partnerships with a total of €106.9m of exposure to Mr Madoff.
Total Spanish exposure, however, is much higher because many Spaniards have invested via offshore centres and not through funds regulated in Spain.
After Santander, the biggest exposure so far announced by a Spanish institution was from BBVA, the number-two bank.
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