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Cru crunch sparks demand for cautious sector clarity

Advisers are calling for clarification of the Investment Management Association cautious managed sector after criticism on housing the suspended £264m CF Arch cru investment portfolio.

IMA rules for the sector require a maximum equity exposure of 60 per cent, with at least 30 per cent invested in cash and fixed interest, but industry pundits have questioned Arch cru fund’s placing in the sector, given its high exposure to private equity.

The Arch cru fund range was suspended last Friday after authorised corporate director Capita and investment manager Arch determined that liquidity in secondary markets was inadequate for the funds to continue operating with current redemption levels. Cru is understood to have been unaware that Capita and Arch had suspended the fund range.

The Arch cru investment portfolio ranks fifth out of 117 funds in the IMA cautious managed sector in the past 12 months, having fallen by only 3.8 per cent against a sector average of 18.8 per cent as at March 16.

Chelsea Financial Services managing director Darius McDermott says: “There are some IMA sectors which need clarifying and cautious managed may well be one of them.

“It would be good if the IMA gave greater clarification for the sector. It is potentially the IMA’s role to look at higher- risk, less liquid investments like private equity, whether it should be in the sector and, if so, at what maximum.”

An IMA spokesman says: “The IMA monitors funds in its sectors on an ongoing basis to check compliance with sector definitions. The cautious managed sector should not be interpreted as risk-based. Funds in the managed sectors offer diversity in asset classes.”

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