The board of ARC Capital Holdings, a £117 million Chinese private equity trust, has publicly criticised its manager over a disputed investment.
In 2010 the fund’s manager – a firm called ARC Capital Partners that is owned by PAG, one of Asia’s largest fund groups – transferred almost £50 million to a subsidiary of the giant Orient Group for the purchase of one of Orient’s businesses.
The deal subsequently fell through, but the money was not returned to ARC. The fund has taken the matter to an arbitration commission in China, which is yet to conclude.
In parallel to this, ARC’s board undertook its own investigation into the transaction.
In a statement to the stock exchange, ARC reported: ‘Following this review (which has taken more than a year to conclude) and having received detailed legal advice, the board is unanimously and firmly of the view that the company has a very strong claim against the investment manager. The board believes that the investment manager has been negligent and/or breached its investment management agreement with the company.’
ARC’s board claimed that the £50 million ‘was paid away, without security or any escrow arrangements, and for merely a contractual promise to transfer all of the consideration shares at a future date if certain pre-conditions were met and, if they were not met, to return the money’.
The board advised that it was unable to provide more detail, on legal advice, but confirmed that it had requested from the manager a response to the allegations and proposals for compensation.