Santander Closes Seven Hedge Funds, Offers to Repay Private Madoff Losses

Nick Parmee

28 January 2009

Optimal Investment Services, the fund of hedge funds asset management company of the Santander group, is to close and pay back to investors seven of its funds under management to ensure clients are fairly treated.

The firm says adverse market conditions have produced a significant increase in the number of redemptions in some of the funds. If these redemptions took place, assets under management would drop substantially, preventing an appropriate execution of the investment strategy, which could "seriously affect the interests of many participants and make expected returns very difficult to achieve."

The funds affected are Optimal Arbitrage, Optimal Multi-Strategy, Optimal European Opportunities, Optimal US Opportunities, Optimal Asian Opportunities, Optimal Global Opportunities and Optimal Global Trading.

Other Optimal funds not affected by this decision are Optimal Latin America, Optimal Elite and Optimal Structural Opportunities and its two single manager funds, as well as its discretionary and advisory mandates.

This move comes as the bank offers to repay private clients whose money it placed with Bernard Madoff. " Santander is offering its private clients the chance to recover 100 per cent of the money which they invested," said a bank spokesman. The offer will not apply to institutional investors.

In December 2008 the bank announced Optimal had a total exposure of €2.33 billion ($3.08 billion) to the Madoff scheme while Santander itself was exposed only to €17 million.

The money will be repaid in the form of Santander preference shares with an annual coupon of two per cent.