Cru borrowed £3.2m in soft loans from Arch fund cells

Cru Investment Management has borrowed £3.2 million interest free from the Channel Islands-listed ‘cell’ companies that make up the suspended Arch Cru fund range it promoted to advisers.

Up to five of the Channel Islands-listed cell companies into which Arch Cru fund investors’ money was fed in turn made loans to Cru according to accounts filed to Companies House.

Under the terms of a 'revolving discount note facility' no interest is payable and the majority of the money is renweable annually at the discretion of Cru until it expires in 2012.

The investment cells involved are: Arch Cru Sustainable Opportunities IC Limited, Arch Cru Private Finance IC Limited, Arch Sustainable Opportunities IC Limited, Arch Finance Opportunities Limited and Arch Structured Finance IC Limited.

Arch and Cru are thought to have set up the loan as a ‘strategic’ measure, which allowed Cru to scale up, employ more people and raise more money for the funds, according to an informed source.

Richard Gough of Castle Court Consulting in Cardiff said that the arrangement was ‘wrong’ and criticised Cru for not disclosing it to advisers.

‘Cru has got some very serious questions to answer about their willingness to disclose. I almost certainly would not have bought the funds had I known that,’ he said.

‘You should not be investing client’s money back into your own company. That is just wrong.’

Neither Cru nor Arch would comment on the arrangement.

The revelation comes as Cru non-executive chairman Jon Maguire and managing director Marc Ainscough prepare to meet with advisers today at the Hyatt hotel in Portman Square, London.