Cru defends soft loans as investments

‘Whether it was a loan from a bank or a private finance house or whatever, we had to make a business case for that, and that business case had to be assessed by somebody, namely Arch, and terms had to be agreed for that lending,’ he said.

Ainscough also defended Cru’s receipt of its share of the annual management charge of the fund during the suspension process, an income stream thought to be currently at £3.6 million.

‘I don’t have to justify it – it’s a contractual relationship,’ he said. ‘It was built into the long-term financial projections for the business.’

‘We had to invest very heavily in staffing, infrastructure systems and brand building.’

Ainscough also admitted that the transfer of assets from the Investment Portfolio fund to its Finance fund may have been one of the factors that led to liquidity problems.

Cru heavily promoted the Finance fund in October last year, launching it with no initial charge, and Ainscough confirmed a number of advisers had moved into it from the Investment Portfolio.

‘Having the opportunity for a new fund, many investors in the Investment portfolio wanted to de-risk their client assets and move from portfolios that included an allocation to private equity,’ he said.

‘When we are sitting back and have access to all the information you may well find that liquidity problems were caused by money moving from the Investment Portfolio to the Finance fund,’ he added. ‘It would be one of a number of reasons.’

But he said that fund managers Arch were probably aware of the potential movement of funds and would have factored it into the management of the fund.