Mackenzie Financial Corp. is liquidating its Alternative Strategies Fund after revealing that one-fifth of the fund’s assets were invested in funds connected to disgraced financier Bernard Madoff.

The $20 million Mackenzie hedge fund, managed by New York-based Tremont Capital Management Corp., had 20% of its assets invested in “funds run by entities associated with Madoff,” according to a statement from Mackenzie.

Madoff was arrested Dec. 11 on a charge of securities fraud, for allegedly running a massive Ponzi scheme that cost investors as much as US$50-billion.

Furthermore, Mackenzie revealed that the assets of the Alternative Strategies Fund were primarily invested in Tremont Opportunity Fund Ltd. Tremont recently ceased to fund redemptions for cash in this fund as a result of “the significant impact of the global market crisis.”

As a result, Mackenzie has suspended purchases and redemptions within the Alternative Strategies Fund, and has begun to liquidate the assets. The company is working to “ensure that all investors have equal access to funds as and when they become available,” it said in a statement.

IE