10:47 am - Bernie Madoff exposure !

Dear Traders,

Many of you including Martin and Myself are holding Man Hedge Fund. We had a scare yesterday when it was announced Asset manager Bernie Madoff was exposed in a Ponzi sceme and Man was exposed to the Madoff funds. Below is the response from PCM and Man Investments.

Bottom line: we can sleep at night.

The exposure is minimal (less than 1 %)and in fact Man made a return of 4 to 5 % in Nov. This is because Man is a fund of funds like a unit trust . If one share of a 100 share unit trust fund goes bankrupt it will minimally affect the portfolio)

In fact Man for 19 years has survived unprecedented market volatility, financial disasters, major financial collapses, extreme currency and commodity fluctuations and managed to prosper. Man has even prospered in 2008 in the face of 40- 50 % declines in most world equity markets

If you think 2009 will be more of the same give me a call to invest some more of your money and make money while most of the sheep investors go to the slaughter house.

Have a good Christmas Holiday and look forward to prosperity in 2009

Bill__________________________________________________________________________________________________________________________________________________________________________________


We spoke to official of Man Investment regarding their exposure to the Madoff funds which were suspended by SEC to facilitate investigation into the Ponzi scheme to fraud investors.

According to the announcement of Man Group Plc, they have US$360m invested via RMF's funds. The amount represents about 1.5% of RMF's US$24bn fund. RMF does not have any direct investment in Madoff funds and the exposure is due to their investment in other hedge funds which may have some exposure to Madoff funds.

Those affected are basically the institutional portions. Whereas in the case of guarantee funds promoted by Man Australia, according to the official of Man Investment, the exposure is very very minimum via some of the 200+ funds that RMF invested.

Between the two funds that have some exposure to Madoff and some of our clients have invested in is OM-IP15Seven Series 2 launched end of 2006. The fund is 1/3 RMF four Season and 2/3 AHL. As at Oct '08, the fund price is at AUD1.2334 and is up another 4-5% in Nov (according to official of Man Investment) due to strong performance by AHL.

We recognise the risk of investing in hedge fund and some of the reasons we have chosen Man Investment are as follows:-
(a) Man Investment is a subsidiary of Man Group Plc, a London-listed company, which is regulated by the exchange.
(b) All the Man OM-IP funds have 3 components - bond, AHL and fund of hedge funds (eg RMF, Glenwood, Baywater etc) and hence more diversified.
(c) RMF being fund of hedge funds is well diversified and normally no more than 5% of the fund is invested in each hedge fund.

The fraud is unexpected and caught many investors by surprise. Due to the diversification of Man funds as well as the strong performance of AHL - a trend-following futures trader benefitting from the up and down of the markets, Man funds have performed well thus far, based on net asset value.

Phillip Capital Management Sdn Bhd