By Naomi Kresge
Dec. 14 (Bloomberg) -- Swiss private bank Reichmuth & Co. warned investors in its Reichmuth Matterhorn fund of hedge funds that they face losses of as much as $330 million related to Bernard Madoff’s investment advisory business.
In a letter to clients, the bank, based in the Swiss city of Lucerne, said the “performance impact” on its fund would amount to a decline of 8.6 percent in the value of its assets. The fund totals about $3.9 billion, Chief Executive Officer Christof Reichmuth said in an interview today.
“It’s unbelievable that no auditor, no administrator, no fund manager noticed this fraud,” Reichmuth said by telephone. “We will have to wait to find out how that was possible.”
Madoff, 70, who had advised the U.S. Securities and Exchange Commission how to regulate markets, was arrested Dec. 11 and charged with operating what he told his sons was a long-running Ponzi scheme in the New York-based firm’s business advising rich people, hedge funds and institutions.
Reichmuth Matterhorn invested in four hedge funds that had business relationships with Madoff, CEO Reichmuth said.
With the potential loss, the Matterhorn fund would be down 18.4 percent for the year to November, according to the letter to clients, which was posted on the bank’s Web site.
“The occurrence is inexplicable,” the letter said. “Further, all periodically proved transactions appeared plausible. Yet no one is immune against fraud,” it said.
To contact the reporter on this story: Naomi Kresge in Zurich at nkresge@bloomberg.net
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