Union Bancaire Privée, one of the world’s largest feeder-fund managers, is trying mightily to explain to its super-rich clients why half of its investment vehicles sent money to Madoff. The unfolding scandal is exposing the clubby world of private banking where everyone apparently thinks their brethren are doing the due diligence.
As investors around the world size up losses on Bernard Madoff's alleged Ponzi scheme, one purveyor of investment services to the world's wealthy -- Swiss private bank Union Bancaire Privée -- is scrambling to explain its ties to the New York financier.
Half of UBP's 22 funds of funds, which channeled clients' money into other hedge funds, put at least some of that money into Madoff-related investment vehicles, including one run by J. Ezra Merkin, chairman of car-loan company GMAC LLC, according to a recent letter from the bank to investors. At the same time, UBP provided an array of services such as investment advice and loans to a division of Fairfield Greenwich Group, a New York firm that funneled investors' money into Madoff funds. Some outside fund managers also looked to UBP, which said it had about $700 million in Madoff-related investments through its funds of funds and client portfolios, in making their own investments.
The potential losses to clients of the Geneva bank shed a light on the discreet world of Swiss private banking. In return for hefty fees, private banks provided wealthy individuals with what were supposed to be superior investment advice and services. Now, the extent of the banks' investments and involvement with Madoff-related funds is raising questions about the value of those services.
UBP stands out, in part, because it is one of the world's largest managers of funds of funds. As of June, it managed some $124.5 billion.
more at http://online.wsj.com/article/SB123058674048040525.html
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