LUXEMBOURG (Bloomberg) — Sixteen funds in Luxembourg were forced to suspend redemptions after they made investments with Bernard Madoff, a group representing the nation's investment industry said.

The affected funds, or units of funds, made investments with Madoff totalling 1.9 billion euros ($2.45 billion), the Luxembourg Fund Industry Association said in a statement yesterday.

Several of the funds have previously disclosed that redemptions have been halted after Madoff was arrested last month for running an alleged Ponzi scheme.

The number of funds, and questions over safeguards, has bankers concerned it may hurt their ability to attract placements from investors worldwide. Luxembourg, a country with fewer than 500,000 people, is the world's second-largest mutual fund market after the US.

"Considering the size of our industry, it's not surprising that Luxembourg funds also invested money (directly or indirectly) with Madoff and are now among his victims," Charles Muller, the association's deputy director-general said in the statement. "Lessons have to be learned to avoid such situations from happening again."

Some of the funds affected include Herald (Lux) US Absolute Return Fund and Access International Advisors LLC's LuxAlpha Sicav -American Selection, as well as Luxembourg Investment Fund - US Equity Plus, the association said.