The Montreux Commodity Trading Fund Plc has suspended new subscriptions and the redemption of “participating shares” after an entity in which its Cayman Islands-based ‘master fund’ had invested failed to meet payment deadlines.
The Isle of Man fund is the feeder fund which invested all of its assets through the Cayman Island-based Montreux Commodity Trading Fund, or master fund.
In a letter seen by FT Adviser dated Friday (27 November), the directors of the Isle of Man-based Montreux Commodity Trading Fund Plc advised shareholders that assets worth $8.4m (£5.6m) were affected.
This $8.4m represented 35 per cent of the master fund’s total assets.
In a press statement, Oliver Harris, managing partner of investment advice firm Montreux Capital Management Cayman, said: “The entity in which the master fund has invested has not fulfilled its obligation to make July, August, September and October 2015 monthly payments.
“As a result the master fund issued a redemption notice. The redemption notice has not been honoured.”
The delay in payments, Mr Harris said, meant the master fund was unable to value its arbitrage commodities trade for six weeks, and therefore could not issue a net asset value (NAV).
On 30 October, the board of directors of the Cayman-based fund decided to create a “side pocket” where the arbitrage commodity trading investment has been placed.
These side pocketed shares have been designated as Class S shares, which are redeemable “only at the option of the master fund”.
“However, the master fund is not obliged to issue a NAV in respect of the Class S shares and the board of the master fund have determined that it is not possible to attribute a value to the side pocketed assets at this time,” the letter to shareholders reads.
Between 22 August and 23 November, the board did, however, issue a NAV reflecting the master fund’s other investments, while excluding the arbitrage commodities trade investment.
Despite this, the board of directors reached the conclusion that it was “impossible” to fairly determine the NAV of the participating shares in the Isle of Man feeder fund.
“The board therefore considers it appropriate to [...] declare a suspension of the determination of the NAV of the participating shares in the company with effect from 22 August 2015.”
As well as suspending subscriptions, the Montreux directors have also suspended its redemption of participating shares.
“The decision to maintain the suspension will be revisited regularly until such time as the board determine that the circumstances giving rise to the suspension have ceased to exist.”
Mr Harris said the board will keep shareholders informed on the status of the suspension.
katherine.denham@ft.com