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Mackenzie’s Madoff-tainted hedge fund faces more woes

Date: Monday, December 21, 2009
Author: Shirley Won, Globe & Mail

The nightmare continues for unitholders in Mackenzie Alternative Strategies Fund.

Investors in Mackenzie Financial Corp.’s only hedge fund saw their investment frozen a year ago, and redemptions halted as they discovered they too were victims of Bernard Madoff’s giant Ponzi scheme.

While unitholders received some monies back this year as securities were liquidated, they recently received a letter from Mackenzie’s executive vice-president David Feather saying that further payments were being stopped.

This Mackenzie fund of hedge funds, which is run by U.S. based Tremont Partners Inc., had about 20 per cent of its assets invested with Mr. Madoff’s New York investment firm.

“Tremont has now informed us that the Securities Investor Protection Act Trustee in the United States has requested a halt of payments from Tremont fund-of-funds with Madoff exposure pending completion of their review and analysis,” Mr. Feather said.

Given there is “significant uncertainty” as to whether the Mackenzie fund can realize any further proceeds or value from its investment in the Tremont fund, “the significantly reduced Nov. 30 monthly valuation for Mackenzie Alternative Strategies is intended to reflect that uncertainty,” he wrote.

Mackenzie Alternative Strategies Fund, which lost 59 per cent in 2008, reported a 16.6-per-cent return for the first 10 months of this year due partly due to Mackenzie redeeming its seed money to cover the Madoff-related loss.

By the end of November, the fund had plunged an astonishing 69 per cent. See Globefund.

Other than releasing the letter, Mackenzie management refuses to discuss the hedge fund's latest woes, or indicate whether it has already or will file legal action against Tremont or its parent firm. “Mackenzie will not be commenting above this,” spokeswoman Trish Tervit said in an e-mail.

Mackenzie Alternative Strategies, which was launched in 2001 and had $177-million in assets at its peak in 2004, had only $19-million in assets by last January when the wind-down began. Mackenzie distributed $9-million to unitholders mid-year, and had a cash balance of $940,000 that was distributed to unitholders last Friday.

Mackenzie Alternatives Strategies Fund was a runner-up for the best multi-strategy hedge fund award sponsored by Canadian Hedge Watch at last December's Canadian Investment Awards gala.