Castlestone Management has released a statement saying it continues to operate as normal despite a visit to its offices yesterday by FSA enforcement officers.
The group said no action has been taken against it by the regulator and its funds are unaffected.
“The purpose of the visit was to obtain data the regulator feels may be relevant to that investigation. Castlestone continues to be fully cooperative with the FSA team.
“From today, Castlestone continues to operate as normal. The FSA visit has had no effect on either the funds managed by Castlestone domiciled in the British Virgin Islands or the UCITS funds domiciled in Ireland and all funds remain open for trading and will accept subscriptions and redemptions as per normal.
“The funds managed by Castlestone Management PLC have been UCITS compliant since launch and are UCITS IV compliant since this regulation came into force on 1 July 2011.
“No legal action has been taken against Castlestone Management.”
It also denied reports works of art said to be assets of the Castlestone Collection of Modern Art fund had been removed from its offices.
“Those works of art located at its offices which are the property of the Collection of Modern Art Fund, were not removed from its offices yesterday and Castlestone confirms these items forming part of the collection will remain housed there.
“The Art fund, as is true of all the Castlestone family of funds, has been unaffected by the FSA visit and remains open to accept subscriptions and redemptions.”
The FSA searched the group’s premises in both London and Chichester yesterday.
In May the Irish regulator suspended subscriptions on the $34.7m Aliquot Commodity (UCITS), $19.64m Aliquot Agriculture (UCITS) and $4.23m Intelligent Portfolio (IQ) Asset Allocation (UCITS) funds.
At the time of the suspension, Castlestone released a statement saying the Irish regulator wanted a higher level of disclosure under UCITS IV, and had requested a new business plan from the firm for the transition to UCITS IV.
It said: “Additional documents have been requested to satisfy a change of administrator which Castlestone has implemented in its continued effort of trying to lower the TERs of the funds.”
However, it later retracted this statement, issuing a second one after the suspension was lifted, in which the group said it “undertook to improve the reporting process and implement several other management changes including the approval of an enhanced UCITS IV business plan which was approved prior to the UCITS IV implementation deadline.”
The group now says it did not take steps to reduce the TERs on the three funds, which have been capped at 5%, but instead brought currency hedging in house in order to lower costs.
Despite the funds’ size and investments in relatively illiquid markets, Castlestone said it has no concerns about being able to meet redemptions. “The instruments the funds trade are completely liquid and therefore the size of the AUM of the fund is irrelevant to Castlestone being able to meet redemptions,” it said.
In fact, the group said between the three funds being suspended and shortly after the suspension was lifted, the portfolios saw net inflows equivalent to 5% of AUM.
Between May and July, the group has seen four members of staff depart, including three members of the investment team plus its head of compliance and legal.
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