Mispricing row after Arch-cru funds fall by £140m
Cru founder Jon Maguire claims mispricing errors are to blame for the £140m losses on the Arch-cru range.
Earlier this week, Capita published estimates for the net asset values of the underlying cells, which showed a loss of £140m between March 13, 2009, when the range was suspended, and September 30, 2009. Individual funds lost between 20 per cent and 40 per cent over this period.
The £363m fund range was suspended by Capita in March due to liquidity concerns because of the size of redemption requests.
Maguire says he is “staggered” by the losses and believes it “increasingly likely” that Capita mispriced the funds. He says Capita relied on valuations of share prices by independent market-maker Winterfloods, which in turn relied on NAVs calculated by Arch administrators Bordeaux Services and inf-ormation provided by fund manager Arch.
He says: “The finance fund is something we will focus on in particular as it was £50m in November 2008 and was still taking money in February and March, holding around £10m in cash with no redemption history, yet it has managed to fall 33 per cent. They have been completely mispriced and it is the price that creates the performance track record which attracts the IFAs.”
Earlier this week, Capita revealed it will begin the distribution of the suspended CF Arch cru fund assets which will take between three to five years.
A spokeswoman for Capita says: “The fall in the value of the funds reflects a fall in the value of the cells. We are in the process of scrutinising carefully the circumstances of, and reasons for, the fall in the value of the cells. We have asked both Arch and the cells themselves for an explanation of the decline in value.”
Last month, Capita warned its shareholders it could face costs as a result of the suspension of the range. It is setting up a fund to assist investors suffering genuine financial hardship.
The directors of the cells have announced that independent investment company Spear-point has replaced Arch as investment manager of the cells.
An IFA action group has been set up to investigate whether any blame should be laid at the door of the administrators, fund managers or promoters of the funds, with complaints likely to mount now the estimated losses have been established.
Regulatory Legal partner Gareth Fatchett is leading the group. He says it has 50 members representing 75 per cent of assets. He says: “Capita and Arch held the money belonging to the IFAs’ clients and they had a duty of care to handle that money properly. We will be looking to see if they have breached that.”
Skerritt Consultants head of investments Andy Merrick says: “The lesson of the last decade is to steer clear of opaque products that tie your money in. It is easier to get out of a bad marriage than some of these bad structured products.”
Candidmoney.com founder Justin Modray says: “No one has done well out of this debacle but the important thing to note is that the responsibility should rest with the fund manager and the promoter.”