We are still waiting for the outcome of the FSA/Capita meetings, however Cru have issued the below statement.

Suspension of CF Arch cru fund range

I am writing today to give a further update on the suspension of the CF Arch cru fund range and to mobilise our IFA support base to ensure that investors’ expectations can continue to be met. We are very grateful for the overwhelming support we have received from IFAs and we believe that there is a broad consensus that Capita, as Authorised Corporate Director, should be seeking a resolution with the Financial Services Authority that protects the long term interests of their clients. There remains very strong support for private market investing and we think that the removal of access to this asset class would be seen as a retrograde step. The most serious concern expressed to us by IFAs is that there is a precipitous fire sale of assets. This would be understandable where the accepted wisdom is that it is better to have liquidity through public listing even if this means that investors have to endure volatility and massive losses such as those witnessed in the public market over recent months. It has been pointed out to cru by many advisers that one of the reasons why many IFAs recommended the Arch cru portfolios and clients accepted those recommendations in the first place was dissatisfaction with public markets and a view that the private market approach was a much needed asset class in volatile and uncertain markets. Our attention has been drawn to other funds recently suspended, including those of New Star and Brandeaux. It is felt that there is sufficient precedent to negotiate a structure going forward that would accommodate the wishes of those investors that wish to withdraw their capital, albeit at significant loss, as well as those willing to accept a longer lock-in in order for the portfolio to generate the returns envisaged in the first place. Given that the investments were in any event designed with medium term objectives, such an approach should be consistent with clients’ original financial planning objectives. Many IFAs have also called for the funds to be available for new investors.

cru – our remit going forward

Whilst cru, arguably, has no legal role in agreeing with Arch, Capita and the regulatory authorities the plan of action going forward, we are asserting that we do have a considerable influential role to play. The entire assets under review have been generated from UK IFAs introduced to the funds by cru. We believe we have a position in respect of seeking to protect the interests of investors and the IFAs that advised them. We recognise this position in our TCF policy.

We appreciate that there is uncertainty concerning the suspension of the funds and this is naturally creating nervousness for clients and IFAs alike. We are given to understand that a formal process will now be established which will involve meetings between Arch, Capita and other interested bodies and experts. We understand that the primary objective of these meetings will be to agree the most suitable way forward that protects investor interests. It is to be assumed that Arch and Capita are liaising closely to review all possible options to create liquidity. At the time of writing we have no details of what this process entails or when these meetings are likely to take place and have sought clarification. As soon as we have any information we shall, of course, let you know. This is likely to take some weeks to emerge. In the meantime we would respectfully ask for patience on your part. The prospectuses for the funds permit suspension by Capita, usually this is for up to 28 days. After this period the specific authority of the FSA is required to continue suspension.

How safe are client assets and what are they worth?
Client assets continue to have the investor protection that is a feature of all OEICs. According to our last available information, the net asset value of underlying assets have held up well in the economic climate and we believe that the communications previously issued by cru on behalf of Arch Financial Products LLP as to the performance of various asset classes and longer term assumptions remain valid. There is now, however, a dislocation between the NAV and the share prices of the underlying Guernsey ICCs. The share price may well fall significantly as there is currently no market for dealing in the shares which is likely to mean that the ICCs will operate at a discount to NAV. This is not unusual in such bear markets and does not necessarily mean that there has been any deterioration in the underlying value of assets within the Guernsey cell company. It remains to be seen what impact this will have on the OEIC unit price when the suspension is lifted. There is, of course, a danger that market forces result in further declines in unit price of the OEICs / share price of the Guernsey ICCs in the near term. This will then represent the best estimate of the fire sale value of assets and will thus not reflect the true value of assets held (the NAV). We strongly believe that the best course of action for investors is not to liquidate client assets until the unit price / share value respectively better reflects the net asset value of underlying assets. Continuing to hold investments will, we believe mean that clients’ expectations when they first invested in the funds are much more likely to be met.

If you have any questions
There has been unprecedented volume of calls to our Cardiff office and sales team and this is to be expected. All at cru are working to resolve matters quickly but clearly this will take some time. We will communicate regularly and as soon as we have anything to report. Please feel free to call and we will respond as soon as we can. Please note that cru has made its best endeavours to ensure that the information in this document is correct. We, however, cannot accept responsibility for any misinterpretation resulting from errors or omissions in the information provided to us.