THE pension fund that looks after the retirement investments of thousands of the region's public sector workers has had its fingers burnt by what is alleged to be the world's biggest-ever fraud.

Merseyside Pension Fund (MPF) has criticised the “apparent failure” of US financial regulators after it was caught up in an alleged $50bn pyramid-selling scandal.

The collapse of former Nasdaq stock market chairman Bernard Madoff's US investment firm came just hours before his arrest last week on a single securities fraud charge. MPF has £21m invested with Bramdean Alternative, a fund headed by City “superwoman” and former Birkenhead High school pupil Nicola Horlick. Ms Horlick's firm had £17m invested – 9.5% of its fund's assets – in Madoff’s scheme.

MPF manages an investment pot worth £3.7bn on behalf of tens of thousands of workers and former staff of local government, housing trusts, Liverpool John Moores University and other local colleges.

However, a spokesman last night sought to play down the effects of the potential losses, which are expected to be about £2m.

“The fund has stringent risk controls in place which ensure that its investments are diverse with limited exposure to any one asset class, market, sector or stock,” he said.

“Events are still unfolding but, based on available information, the impact on Merseyside Pension Fund’s assets is minimal, and we can reassure pension scheme members that their statutory entitlements will not be affected.

“Madoff is only one of several elements that the fund has invested in through Bramdean. Although the overall value of the holding with Bramdean has reduced following recent news, we are hopeful that it will recover.”

MPF said questions needed to be asked about the role of the US regulatory regime which failed to identify the alleged nature of Madoff’s scheme.

“We are very concerned at the apparent failure of the regulatory and securities market regime in the US,” said the pension fund spokesman.”

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