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Madoff fraud costs pension funds €44m so far

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EUROPE - Only a handful of European pension funds have declared an indirect investment interest in the recent Madoff ‘Ponzi' scheme, fraud but the potential losses to date are now understood to be in the region of at least €44m.

Most of the schemes so far declaring interests have invested indirectly with Bernard Madoff through or under the advice of alternative investment companies, including Bramdean Investment Management and Pioneer Investments.

Samco, the asset management company of the Shell pension funds, said last week it had a total of $45m (€32.2m) through indirect investments on behalf of the Dutch Shell Pension Fund, while the 889m local authority-led Clwyd and Merseyside pension funds appear to have up to £2m each invested with Madoff and Hampshire confirmed it may have exposure worth approximately £7.2m.

A statement from Merseyside suggested the impact on its £3.7bn (€3.92bn) pension fund was "minimal" as figures at the end of October 2008 indicated the net asset value of its investments through Bramdean was approximately £21m invested and of this the Madoff element forms only 9.5% or £1.995m.

Clwyd fund, which is managed Flintshire County Council in Wales, told members its exposure is "extremely small" though it has 2.5% of its fund invested with a hedge fund of fund at Pioneer, so the total sum exposed to Madoff is understood to be approximately 9.5% of the portfolio or £1.9m.

And Hampshire revealed last week it had a £25m mandate with Bramdean but had also been advised by Bramdean to invest £4.2m in the F2 Elite fund linked to Madoff. (See earlier IPE story: Madoff fraud hits pension funds)

All pension funds hit by this scandal say they are still in discussions with their respective investment managers and managers, though they have sought to reassure members their pensions will not be affected as the sums invested are not sufficient to cause damage to their liabilities and funding.

However, Samco and the Dutch Shell pension fund were already having a tough time before the Madoff revelations as it only recently declared its funding ratio had almost halved within the last year because of the financial turmoil. (See earlier IPE story: Shell's funding ratio tumbles)

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