By Zoe Schneeweiss and Matthias Wabl
Dec. 24 (Bloomberg) -- A month ago, Bank Medici AG was celebrating after its biggest hedge fund won first prize in Germany for “amazing” performance.
Officials at the Vienna-based private bank are now trying to determine if the investments have any value left. Two of Bank Medici’s largest funds had all of their assets with Bernard Madoff, the New York-based money manager who confessed earlier this month to running a Ponzi scheme. Bank Medici, founded in 1994 by Chairman Sonja Kohn, said last week it had $2.1 billion with Madoff.
Kohn had “active relationships” with 2,000 funds, according to the company’s Web site. Her favorite was Madoff, based on the amount of money she had with him. Bank Medici may be Europe’s second-biggest loser from Madoff’s collapse, after Spain’s Banco Santander SA, which has said it has about $3.1 billion of client funds at risk. Madoff, 70, was arrested Dec. 11 after he told employees that his firm may have cost clients as much as $50 billion.
“Madoff attacked people who didn’t do their due diligence, but placed their confidence in friends, or the word of mouth,” said Michel Derobert of the Swiss Private Bankers Association in Geneva. “That’s what makes this case particularly vicious.”
Kohn, 60, hasn’t said publicly whether she has met Madoff or disclosed when she began investing with him. Kohn, who owns 75 percent of Bank Medici, and Chief Executive Officer Peter Scheithauer weren’t available for comment this week, company officials said.
Opera House
Investment Chief Andreas Schindler, who greeted a reporter at Bank Medici’s fourth-floor suite facing Vienna’s 140-year-old Opera House, said he isn’t allowed to comment. The company said in March that it had assets under management of $3.3 billion.
Federal prosecutors in the U.S. are trying to piece together how Madoff’s scam worked. Securities Investor Protection Corp. said last week that Madoff’s financial records are “utterly unreliable” and may take six months to sort out. Washington-based SIPC is in charge of liquidating Madoff’s firm.
Bank Medici’s Herald USA Segregated Portfolio One and Herald (Lux) US Absolute Return funds, which invested with Madoff, were closed to customer redemptions on Dec. 11, the same day Madoff was arrested.
The flagship Herald USA fund, started in 1996, reported a return of 6.5 percent this year as of Nov. 28, according to data compiled by Bloomberg. Competing funds fell by an average 17 percent in the same period. “The fund didn’t have a single negative quarter since it came into existence,” it said in a Nov. 24 statement. The fund had $1.9 billion of assets in March.
German Award
Herald Luxembourg, opened in March, has been “solid as a rock,” Bank Medici said in a Sept. 29 statement, adding that the fund’s year-to-date return was 3.9 percent. The fund had assets of $225.7 million as of Oct. 31, Bloomberg data show.
Bank Medici won first prize last month from IBC Consulting in the German Hedge Fund Awards because of its stellar returns, which were due to Kohn’s extensive contacts, the bank said in a Nov. 24 statement.
The award reflected Bank Medici’s one-year gains as of the end of September, said Volker Schlicht, head of corporate finance at IBC Consulting, in an interview yesterday.
Bank Medici said it sold the two Madoff-based funds to institutional investors. About 7 percent of the funds’ assets were held by Austrian clients and the rest was with customers from around the world, Bank Medici said on Dec. 16.
The company has strong links in Austria, having served as an adviser to the country’s Minister of Economics from 1996 to 2000, as well as to the minister of foreign affairs and the Vienna Stock Exchange.
UniCredit, BNP Paribas
Kohn had “a number of very wealthy clients from all over the world, from Italy to Israel and the Middle East,” Der Standard newspaper reported on Dec. 16. Johannes Farnleitner and Ferdinand Lacina, former ministers of economics and finance of Austria, sit on the bank’s supervisory board, according to the company’s Web site.
Bank Medici did business with at least two European banks -- UniCredit SpA and BNP Paribas SA -- that have reported losses related to Madoff. Milan-based UniCredit also has a 25 percent stake in Bank Medici.
Pioneer Alternative Investments, a Dublin-based unit of UniCredit, paid Bank Medici commissions of 835,000 euros in 2007 for referring investors, Bank Medici said in its annual report issued on June 23. Pioneer invested almost all of its Primeo Select Fund with Madoff, according to a fact sheet on its Web site. Primeo Select has about $280 million of assets.
Paris-based BNP produced and issued for Bank Medici a so- called tracker-certificate to replicate the performance of its Herald USA Absolute Return Fund, according to a document on BNP’s German Web site. The certificate let people put as little as 100 euros ($140.13) into the structured investment products.
Fees and Commissions
This isn’t a product for BNP clients, a bank spokeswoman said yesterday. BNP has said it has about 350 million euros at risk from Madoff via “its trading business and collateralized lending” to funds of hedge funds. The company said Dec. 14 that it has “no investment of its own” in Madoff’s funds.
Bank Medici has increased its staff fivefold since 2004 when it had three employees and earnings of 41,000 euros. The company reported net income of 541,000 euros in 2007, and said it collected fees of 9.7 million euros and paid out commissions of 7.1 million euros.
No comments:
Post a Comment