Cru on a knife edge as fund trail is blocked

Arch security for the loans is the distribution agreement between it and Cru that is thought to entitle Cru to 0.9% of the annual management charge of the funds. But if fees from the funds continue to be cut off, this security is effectively worthless.

In a letter being sent to advisers invested in the funds today, Ainscough calls for the custodians to reinstate the fees and points specifically to the danger that Cru may have to default on the loans.

The letter reads: ‘The funds will be used to repay the loan to the Guernsey ICCs [the cells] and avoid a write down of the Cru debt (which would be to the ultimate detriment of investors!).’

As authorised corporate director, Capita is responsible for paying Arch for managing the funds. But it needs the approval of BNY Mellon and HSBC. Acting as trustees, they are able to stop the payment of fees if they believe it is in the interest of investors to do so.

Cru relies on a separate arrangement with Arch for its remuneration, but Arch has stopped paying Cru after Arch stopped receiving money from Capita, Ainscough said.