Jon Maguire responds to our questions

Citywire: What proportion of money will investors recover if the funds are closed and over what time scale?
JM: We have no reason to believe that the underlying investments were purchased with anything other than a view to long-term growth but we have always operated with information from Arch, either directly or indirectly, to explain the return profile of the funds. We again encourage Arch to say something and that trade press focus on Cru is erroneous, as it is Arch and Capita that should be standing up to be counted and say something.

Citywire: How do you justify the £3.2 million of soft loans taken by Cru from up to five of the Arch Cru cells? Should this not have been disclosed to advisers and investors?
JM: Not so sure that an interest rate of 12% per annum is a soft loan. Furthermore, this lending was undertaken by Arch cell companies that have institutional backing. We did not borrow from the Oeics and again this is a matter for Arch, not Cru. Cru took on lending to develop the Africa agri business because Arch would not lend to it, despite assurances that they would, and despite us stating at the launch of the Oeics that 4% of assets raised in the Oeics would be dedicated to African agri investment. For the record, it is a great shame that the Oeics did not have significant African agri investments because Africa farmland is doubling every year whilst student accommodation in Exeter etc, has plummeted.

In terms of disclosure, I have never hidden from what I believe to be solid investments, nor have I ever engaged in securing investment for personal gain unless I have fully disclosed my involvement. I will also point out that even if Cru equity which was part of the lending had ended up in the Oeics via Guernsey companies, all things being equal this would have been a really good idea. Cru have an extremely strong retail franchise in private market investing and this should have had a great long-term future. The reason why so many people piled into New Star’s Financial Opportunities Fund, prior to the listing of New Star, was that it held New Star equity. There is an adage that says: ‘don’t buy the fund, buy the manager’. Clearly events have conspired against this, but we suspect this will hold true for numerous businesses in the future. 

Citywire: Africa Invest has an outstanding soft loan of £900,000 from Cru. Was any of the money borrowed from the cells lent to Africa Invest?
JM: I have answered this in the previous question and given the need to restructure the Malawi business this debt has been converted to equity.

Citywire: What will happen to the £3.2 million Cru borrowed if the Cru business fails?
JM: Why should the Cru business fail? I have had to take hard choices that have collapsed my head count to ensure profitability month on month. We have assets of £1.6 million and we have already paid down £1 million. Our aim is to generate £1 million of profit over the next 12 – 18 months, pay back all lending and then continue to be cash generative to the benefit of share holders. Cru also has a stake in, what I believe, will be one of the leading agri businesses within a decade, Africa Invest. In the valley of despair you just keep going and I remain confident for all stakeholders and share holders that we will meet our obligations.

Citywire: Should Cru still be entitled to an annual management fee from the suspended funds?
JM: I think history will show that Cru played as significant a part in the resolving of the problems, faced by investors, as it did in raising the assets in the first place. When we know the final outcome, we will let investors judge whether we were worth the money.

Excerpts from a video by IFAtv of the Cru press conference, from which Citywire was barred, can be viewed here.