Six unit trusts were suspended on March 13 after authorised corporate director Capita and investment manager Arch deemed liquidity was inadequate to deal with the level of redemptions. Ten days later and so many questions remain unanswered.
cru is understood to have been unaware that Capita and Arch had suspended the fund range but now questions are being asked about the part-suspension of funds on two platforms which preceded Capita’s official suspension. All we do know is that thousands of savers are now unable to withdraw their money from a range that was at one point valued north of £400m.
FundsNetwork suspended buying of Arch Cru’s fund range on March 5 and Cofunds followed suit on March 9, days before Capita suspended the range.
A spokeswoman for Capita says: “The word suspension has been misapplied. The suspension we made was fiduciary and regulatory but when the platforms said they suspended the funds, they stopped selling them on their platforms. This wasn’t anything to do with why we suspended them which as stated was because of the illiquidity of the assets of those funds.”
Capita is currently reviewing the options for the funds and will be writing to investors within 28 days of the suspension on March 13.
Uncertainty remains over the future of the fund range with the suspension duration yet to be confirmed but attention is beginning to turn to the portfolio’s valuations with some reports again questioning their frequency and accuracy.
cru is petitioning Arch, Capita and the FSA against a fire-sale of assets warning them not to liquidate underlying assets in the portfolios at a time when all asset classes are significantly undervalued in the current economic climate.
It says: “Capital markets are chasing liquidity and in this environment the value of assets, the value of almost anything, becomes deeply uncertain. We do not believe it is the time to be forced to sell assets to meet investors looking to exit the funds because those who remain potentially face a substantial and unnecessary loss as the result.”
Speaking to a national paper, cru founder Jon Maguire said the group was keen that the FSA and Capita did not take decisions behind closed doors and force a hurried sale of assets at a huge discount.
Chelsea Financial Services managing director Darius McDermott says: “I don’t know any advisers who bought into it so it’s difficult to distinguish but generally if people are in any way worried they tend to move their money.
“Is the unit price a true reflection of the underlying asset classes? If it is a true reflection you should be able to get out without having lost a huge amount of money. If it’s not and people fire-sale or try to exit in a hurry then it may be that people find they’re going to be sitting on bigger losses.”