Hedge fund RMF tightens process post-Madoff - RMF's Four Seasons Strategies Fund

Hedge fund RMF tightens process post-Madoff
Fri Feb 13, 2009 8:00am

By Laurence Fletcher

LONDON (Reuters) - RMF, the arm of hedge fund firm Man Group (EMG.L) that took a $360 million (247.9 million pounds) hit from the alleged fraud by U.S. financier Bernard Madoff, has tightened up its investment process following the scandal, S&P told Reuters.

RMF, which revealed its exposure to the alleged $50 billion fraud last month and subsequently launched a review of its procedures, has now committed to face-to-face meetings with all the decision makers on funds it invests in, director of fund research at S&P Fund Services Randal Goldsmith said.

S&P rates RMF's Four Seasons Strategies Fund, which was exposed to Madoff.

The Switzerland-based firm's process had previously been to meet the manager of each fund it holds, Goldsmith said on Thursday.

However, the often-complex nature of hedge fund holdings meant this was not always, as in the case of Madoff, the same person who made the underlying investment decisions.

Man Group declined to comment.

In the case of Madoff, the Four Seasons Strategies fund had invested via the Rye Select Broad Market XL Portfolio, a fund managed by Tremont but only sub-advised by Madoff, Goldsmith said.

This meant RMF had done due diligence on Tremont but had not met Bernard Madoff himself, the decision maker on the fund's investments, since 2001, he said.

Last month Man Group Chief Executive Peter Clarke told Reuters the firm would sue over its exposure to the Madoff scandal. Madoff, a former Nasdaq stock market chairman, is accused of running a long-standing Ponzi scheme in which money from new investors was used to pay withdrawals of earlier ones.

Clarke also said at the time that the firm did not usually invest via feeder funds.

(To read the Reuters Hedge Fund Blog click on blogs.reuters.com/hedgehub; for the Global Investing Blog click here)

(Editing by Erica Billingham)