Two weeks ago, Connaught Asset Management announced that it was winding down its third unregulated collective investment scheme after a spike in redemption requests from investors. 

Jason McGee-Abe spoke to Peter Sobey, Chairman of UK Acorn Finance Ltd - the Specialist Partner for Connaught’s Income Fund Series 3 – and Mike Davies, Chairman of Connaught Asset Management (CAM), to find out what will happen to UK Acorn Finance and how long the winding down process will take…

The Income Fund Series 3 was launched in July 2010 in conjunction with the Specialist Partner – UK Acorn Finance Ltd – and was a natural progression for the asset manager after it had looked closely at the agricultural market and wanted to marry up its existing model with its other funds with agricultural assets. 

This Fund, which is invested in the short term agricultural lending sector, solely utilises the expertise of UK Acorn Finance and this partnership allows farmers to undertake financial restructuring or grasp an opportunity that cannot be financed elsewhere.

However, despite the Income Fund Series 3 being completely separate from the Series 1 and 2 funds there had been a spike in the recent level of redemptions and to avoid any investor detriment Mike Davies said at the time, “we have reluctantly agreed that it is in the best interests of investors to let the Fund naturally wind down as the assets are redeemed to the Fund”.

The Fund will continue to perform during the wind down process and investor monies will be redeemed as the loans mature and UK Acorn Finance Ltd will continue to pay out the distributions. However, UK Acorn Finance will not be sourcing new business through Series 3 during the winding down process.

Asked about this development and the affect it will have on UK Acorn Finance, Peter Sobey said: “Of course we were very disappointed that the Connaught Income Series 3 Fund was suspended, especially as the Fund was performing well and meeting all of its obligations. However, despite the Fund being completely unrelated to the Series 1 and 2 Funds, the spike in redemptions for Series 3 really left Dunadd (the Fund Operator) and Connaught with no choice but to suspend the Fund. We continue to have a good relationship with Connaught and are working closely with them in respect of winding the fund down for the benefit of all investors as assets are redeemed. 

“In respect of our own lending business this has obviously had an immediate impact on us. We do have associated Companies with other sources of finance available and will continue to source new business.”

Commenting on how long the winding down process will take, Mike Davies, said: “The process of winding down Series 3 by CAM and the Specialist Partner, UK Acorn Finance Ltd, continues. UK Acorn Finance has agreed to ensure there is no detriment to investors in anyway whilst this is undertaken. We anticipate the process will take approximately 24 months to complete.”