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Trail cash shelved in cru fund valuation quandary

Capita Financial Managers is suspending trail commission to advisers who have clients invested in the £400m CF Arch cru fund range.

On July 29, Capita announced that all charges from investors in the fund range, including annual management charges to the funds’ investment manager and trail commission to IFAs, are being suspended.

The suspension applies to fees accruing from April 1, pending the outcome of Capita’s review of the funds.

On July 6, Capita said Arch cru trail fees were “under active consideration” while the value of the funds was being established.

Capita chief executive officer Chris Addenbrooke says the firm regrets the temporary loss of income to IFAs but the priority has to be investors.

He says: “We do not think that shareholders would consider it justifiable for fees to continue to be paid out of the funds while shareholders are unable to access or realise their investments.

“We recognise that IFAs may be spending more time advising shareholders in relation to the fund at present but we do not consider that this justifies the ongoing payment of renewal commission.

“In addition, renewal commission is calculated by reference to the value of investments in the fund and until our review is complete we cannot ensure that we are accurately calculating that value.”

Last week, Money Marketing revealed that Arch Financial Products had suspended its Guernsey-domiciled fund cells, in which the Arch cru funds are substantially invested, while it determined their correct value.

This prevents the funds from trading their holdings in the shares of the cells on the Channel Islands Stock Exchange but Addenbrooke says the investments were illiquid in nature and contributed to the original suspension of dealings in the UK funds in March 2009. He says the suspension may help to provide some stability while the firm undertakes its review of the funds.

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