Statement on Hampshire Pension Fund investments and USA Madoff Fraud case

Councillor Ken Thornber, the Leader of Hampshire County Council, which is the administering authority to the Hampshire Pension Fund, said that despite the potential losses, due to alleged fraud, there is no risk to the Fund's 46,000 contributors or 27,000 pensioners, both in terms of existing pensions and future benefits.

He said "The actual position remains to be seen and Hampshire's exposure is extremely small relative to other investors. Nevertheless the Hampshire Pension Fund is very concerned that a small proportion of its investments may be at risk because of this alleged fraud."

If the losses in Madoff funds are confirmed, they would represent £7.1m (0.3%) of the Hampshire Pension Fund's total assets of £2,400m. Whilst any losses are deeply disappointing, they should be seen in the context of the much larger falls in the overall value of the Fund as a result of the financial crisis from £3,100m in October 2007 to £2,400m now, a fall of £700m (22.5%).

The Hampshire Pension Fund originally allocated up to 10% (£270m) of its then £2,700m fund to alternative investments. It could do this in the context of its overall portfolio which also includes a large proportion (20%) of index linked bonds.  It is advised on this alternative investments portfolio by Bramdean Asset Management. The amount was recently reduced to £250m following the recent falls in the investment market and before this event, it had been decided not to invest further in hedge funds during current uncertainties. These are long term commitments and only about £120m has been drawn down in cash. About 80% is in private equity etc, 10% in Bramdean Alternatives Ltd (BAL) pending longer term direct investments and only 10% is in direct hedge fund investments.    

BAL is an investment company specialising in alternative investments and is listed on the London stock exchange. The Hampshire Pension Fund holds an investment costing £25m in BAL. As part of its portfolio of investments, BAL has invested in hedge funds linked to the Madoff strategy whose principal Bernard Madoff was arrested In New York on Thursday 11 December 2009 by FBI agents and charged with alleged fraud.

According to Bramdean, 9.5% of BAL's portfolio is in Madoff investments. On this basis, £2.4m of the Hampshire Pension Fund's investment in BAL is at risk from the Madoff losses. However, BAL's fund manager Nicola Horlick has indicated that BAL's portfolio has performed better than the stock market in recent months and this will have benefited the Hampshire Pension Fund. The Hampshire Pension Fund has also directly invested £4.7m in the F2 Elite hedge fund, which is linked to Madoff investments, on the advice of Bramdean Asset Management as part of the Hampshire Pension Fund's £250m commitment to alternative investments.