Man’s Marketplace / Madoff - 2009 Annual Report

(From our 2009 Annual Report)

Man announced in December 2008 that RMF had approximately $360 million invested indirectly in two Madoff-related funds.

The Madoff fraud was a difficult experience; understandably, our investors are disappointed at the losses suffered.

We have met with investors involved in products that had Madoff exposure to discuss the circumstances of our allocation, and specifically the due diligence procedures we followed. Open communication has allowed investors to make a decision as to whether to continue or terminate their investment mandates. In a number of cases, we understand that investors have redeemed their investments as a direct result of the Madoff exposure. Other investors have performed additional due diligence to validate that the ongoing improvements we have made to our processes are satisfactory.

As part of our ongoing commitment to continually enhance and refine our due diligence procedures, we have made a number of improvements to our underlying processes and procedures. These can be summarised as follows:

  • Heightening the scope of operational due diligence on a fund and manager where key service providers are affiliated either with the fund or manager, irrespective of the level and stringency of compensating controls;
  • Additions to RMF's 'rejection criteria' for existing and future investments, which include transparency and custody-related considerations; and
  • The use of managed accounts to create transparency and increase operational control over assets through custody, valuation and administration.

It is clear from the Madoff experience that our industry has been shaken by the fraud. Greater transparency and enhanced procedures in scrutinising managers are a necessary and obvious outcome of the situation.