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Suspensions all round as Arch Cru crisis slumps to new low
by Gavin Lumsden on Jul 29, 2009 at 13:13
Capita Financial Managers has suspended the collection of the annual management charge from the Arch Cru funds and trail commission payments to advisers.
Confirming a Citywire report on 6 July has said that the collection of all charges relating to the net asset value of the suspended fund range will also be suspended. In addition to the payment of the amc to Arch Financial Products, the fund manager, and trail to IFAs, it also includes depositary, custody and accounting fees.
The suspension applies to fees accruing from 1 April and will continue until Capita has completed the review of the Arch Cru funds.
Capita also commented on the suspension by the Channel Islands Stock Exchange (CISX) of the cell companies in which the Arch Cru funds invested.
Chris Addenbrooke, chief executive officer of CFM, said the suspension of the listing would prevent the Arch Cru funds from trading their holdings in the shares of the cells but noted their illiquidity had been a factor in the fund range's suspension in the first place.
He added: 'While the suspension of the CISX listings of the cells is therefore unlikely to impact significantly the ability of the CF Arch Cru Funds to realise their investments in them, we believe that the suspension of the CISX listings may assist in providing some stability while the issues we are addressing as part of our review of the funds and their assets are resolved.'
On the subject of the suspension of trail payments to advisers Addenbrooke said: 'While we regret the temporary loss of income to IFAs that our decision will involve, our priority has to be the needs of shareholders. We don’t think that shareholders would consider it justifiable for fees to continue to be paid out of the funds while shareholders themselves are unable to access or realise their investments.'
He added: 'We recognise that IFAs may be spending more time advising shareholders in relation to the fund at present, but we do not consider that this justifies the ongoing payment of renewal commission. In addition, renewal commission is calculated by reference to the value of investments in the fund and, until our review is complete we cannot ensure that we are accurately calculating that value.'
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7 comments so far. Why not have your say?
Andrew Somers
Jul 29, 2009 at 13:58
Does this also mean that Arch will not be earning Fee income on the Guernsey Cells? If not, surely this is a logical step to take. How Arch can continue to earn fees managing these assets is beyond me!
As Investors we have received no information from Arch nor Capita as to when we can expect to receive any of our money back or how we can offload our Shares in these Funds which are now indefinitely suspended.
Surely Arch should no longer earn fee revenue on the Guernsey Cells until a plan for how liquidity is returned to Investors is released.
report thisAdrian Bennett
Jul 29, 2009 at 14:31
Mr Somers
Why did you invest in this fund inn the first place? It was so obviously an accident waiting to happen and I just do not understand why any sane investor or adviser would have placed funds with Cru!
report thisTom Bartlett
Jul 29, 2009 at 15:24
It still begs the question - How are investors going to get their money back?
The guernsey companies cannot be traded as they are suspended. Arch keeps charging fees for the Guernsey companies, thus using up all cash the guernsey companies have. Can Capita update investors on cash generated in guernsey companies since suspension?
Is Capita going to suspend the fees for guensey companies as well? If not, this just seems another effort by Capita to hide their incompetency while Arch continues to take investors for a ride!
report thisrichard gough
Jul 29, 2009 at 15:29
I am always intrigued by advisers who (with the benefit of hindsight) are able to say why investing in a particular fund was always going to go wrong.
Whilst this can be seen with certain non regulated, geared or highly specialised investments I am unclear as to how such a statement can be made in respect of a daily dealt FSA regulated fund.
report thispeter clowes
Jul 29, 2009 at 17:12
richard gough is quite right in that an FSA regulated fund should have been ok. the Fsa after all have an excellent record in ensuring all these offerings are safe as they and all their predecessors are so diligent in the closing of the stable door.
Arch/Cru may have have been alright but it always seemed smoke and mirrors.almost as bad as investing in second hand American life insurance policies.
read Vernon Coleman
report thisJohn Stirling
Jul 29, 2009 at 18:45
The problem with Cru was that the liquidity of the underlying asset (and indeed pricing) did not match the liquidity and pricing of the retail product.
This was patently clear, and any adviser who did not realise this was not doing sufficient diligence.
Doesn't make them a bad underlying investment, did make them an accident waiting to happen as there was always going to be a 'redemption event' - every fund has it - it's why property funds have the ability to suspend redemptions - and property is far more liquid than some of these private equity deals.
At least with second hand life policies (and no, I don't invest our client's money in those either) there is a defined and actuarially valid repayment profile, and if it's more than 18 months on average, then it's too risky.
Sometimes it isn't about what your client wants, it what all the other buggers will do to your client's fund.
report thisMAUREEN HARRIS
Aug 13, 2009 at 19:29
we are pensioners living abroad with only arch cru investments to live on and have had no help from our IFA and no news for months and it seems unlikely we will have any in the near future
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