New York (HedgeCo.Net) – Spanish bank Santander is seeking to freeze redemptions after stating on Monday that they currently lack the liquidity to meet the rising demands for withdrawals.  Investors in the bank’s flagsihip real-estate fund, the Santander Banif Inmobiliario FII, moved to withdraw 80 percent, or $3.3 billion, of the fund’s capital at the end of January according to a regulatory filing yesterday.

Santander stated that investors would receive 10 percent up front of their redemption claims, to be followed by 10 percent increments whenever they could meet those demands.  If they are still short on cash, they would inject capital themselves, they added.

The bank is hoping to put a halt on full capital withdrawals for the next two years so they may start an “orderly program of disposals.”  They added that if they could not fulfill requests at the end of that period, they would wind down the fund.

The fund suffered losses last year after dropping 15 percent at the start of the fourth quarter after market conditions in residential real estate rentals took a turn for the worse.  67 percent of the fund’s assets were invested in real estate.

Some experts worry that the influx of demands at Santander may spark a domino effect with other Spanish funds invested in real estate, which considering their illiquidity, could pose a major a problem.

Santander has had their share of obstacles recently, including a massive 2.33 billion euro exposure to Bernard Madoff through their Optimal Investment Fund.  Shares closed down 4 percent yesterday to 5.49 euros.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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Bloomberg - Banco Santander SA’s hedge fund unit used risk software that according to its developer may have “waved red flags” about Bernard Madoff investments.

“You definitely would have seen it,” Riskdata SA Chief Executive Officer Ingmar Adlerberg said in a phone interview from Paris. Many of the company’s 80 customers have thanked it for flagging risks linked to Madoff, he said. He refused to name them or comment specifically on Santander.

Santander offered on Jan. 27 to pay 1.38 billion euros ($1.8 billion) to private banking clients hit by Madoff-related losses through the Spanish bank’s Optimal Investment Services hedge fund arm. Geneva-based Optimal said Riskdata’s FOFiX product was key to “quantitative risk analysis” for hedge fund investments in a 30-page due-diligence questionnaire filed last April with the Alternative Investment Management Association.

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Tags: alternative-investment-management-association, banco santander, bernard madoff, bloomberg, chief executive officer, due diligence, fund investments, investment management association, investment services, optimal investment, phone-interview, private-banking, quantitative risk analysis, questionnaire, red-flags, risk software, spanish bank