UK Alternatives Firm Starved Of Liquidity, Suspends Funds

Rachel Walsh

17 March 2009

UK alternative investment manager Cru is suspending its funds because it has insufficient liquidity to meet client redemptions, according to a statement from Capita Financial Services, the director of the Arch Cru fund range. The funds were heavily invested in private equity and finance.

“After consideration of all relevant circumstances relating to the funds’ assets, we have, in conjunction with Arch Financial Products, the delegated investment manager, come to the conclusion that current market conditions have led to the significant illiquidity of the assets of the funds and in light of this we consider it is in the interests of all shareholders in the funds to suspend the issue, cancellation, sale, redemption and transfer of shares in the funds,” Capita said in the statement, issued just before the weekend.

“In the event that we elect to resume dealing in the shares of the funds, we will write to all shareholders informing them of this fact. We are currently reviewing the options for the funds and we will keep all shareholders appropriately informed about the suspension, including its likely duration,” the statement continued.

Cru’s board met on Friday to consider what action it would take to protect advisors and investors. Key to this is to prevent a fire sale of underlying assets of the funds because, the firm said, it believes this will create unnecessary losses to investors. “We will discuss this with Capita and the FSA and will advise you of the outcome as soon as possible,” Cru said in its statement.

“Naturally we regret this development but we will work to ensure that investors are protected against a fire-sale of assets into a practically non-existent market. 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. This matter will be impressed on both Capita and the FSA,” the statement concluded.