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Arch cell value plunges 30%

Arch’s fair value estimate for one of the Guernsey-listed cell companies under its cru funds is currently 30 per cent below its last published net asset value, with an average fall of 10-15 per cent.

Advisers have told Money Marketing that Arch Financial Products chief investment officer Michael Derks disclosed the figures at an IFA briefing on Monday at the Hyatt Regency hotel in London.

Derks is understood to have told advisers that the average discount between the last published fair value estimate across the 23 Guernsey cells and Arch’s fair value estimates is between 10 and 15 per cent but for the Arch cru private finance IC sterling share class the discount was nearer 30 per cent. He said this could result from impairments that Arch was aware of but that were not yet reflected in the monthly net asset value listed on the Guernsey stock exchange.

At the briefing, cru founder Jon Maguire said the turbulent markets have shown the funds’ structure to be unsuitable for retail investors. He reportedly said: “Now what we are acutely aware of is that this structure does not work for retail, unfortunately. We thought it did but obviously it hasn’t.”

Cru says the structure was set up with Capita and had the approval of the FSA.

Maguire said one of the contributory factors to the fund suspensions may have been IFAs switching out of the investment specialist portfolio at the end of 2008 to de-risk portfolios. Of the £60m inflows into the CF Arch cru finance fund, which launched in November last year, Maguire said around £25m may have been from the investment specialist portfolio. He predicted the suspension was likely to last for another three to four months or perhaps longer and said the secondary markets for underlying assets might not return until 2010.

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