Swiss private bank Sarasin confirmed that its Torneo Multistrategy Fund, which is currently in liquidation, had an exposure to Madoff through one single hedge fund of  SFr6 million ($5.16 million).

The Torneo Fund liquidation was decided upon in early October and the redemption from the affected hedge fund was placed immediately thereafter. Due to the redemption time period, the cash proceeds have been expected by end-December 2008. However, owing to current events the bank said the redemption is likely to be suspended.

“The closure of both Bank Sarasin’s Torneo funds enables us to further strengthen its focus on its core competencies. Furthermore, this step is in accordance with our customer's wishes for more transparency and higher liquidity for Sarasin products,” a spokesman told WealthBriefing.

The Investment Policy Committee of Sarasin had decided to exclude the hedge funds from the firm's alternative investment suite as early as May of last year.

“The motivating factors behind this decision were and continue to be low liquidity, a limited amount of regulation and the difficulty in assessing the risk situation for individual hedge funds due to a high level of non-transparency,” the spokesman said.

In addition, the bank said it had had to face increased redemptions for the Torneo funds for several quarters before the decision to liquidate the funds. It expected that redemption applications would have increased significantly, judging by the developments on financial markets and in the hedge fund industry.

“Continued extensive outflows would have had a negative effect on the liquidity and diversification options of these funds. As a result, liquidation of the two Torneo funds was also important for the protection of investors who chose to remain in the funds,” the spokesman added.