Dear Investors:
It is with disappointment we write to inform you that, as a result of the
difficulties experienced by a number of our underlying holdings and their
decision to suspend subscriptions and redemptions, the Directors of Scandium
Absolute Return Fund have resolved to suspend all subscriptions and redemptions
from the fund. The Board of Directors believe this course of action is in the
best interests of all shareholders.
To date, the ongoing financial crisis has severely impacted asset values across
equity and fixed income markets in which many of our underlying managers
operate. This combined with an absence of liquidity in these markets and forced
selling of assets in November by a number of large hedge funds undergoing
liquidation has caused significant losses within our portfolio. In November we
expect these factors to impact our performance in the region of -10% to -12%
making the year to date return in the region of -21% to -23%.
As a result of this negative performance, our redemptions received to date and
anticipated future redemptions, the fund may experience difficulties
maintaining sufficient diversification across our target allocation of
underlying managers. As we are forced to sell more liquid holdings to meet
increasing redemptions the fund's portfolio may become increasingly
concentrated across a smaller number of more illiquid holdings. The potential
negative impact to performance has led the Directors to actively explore
available options to protect the interests of all shareholders in the fund,
including a possible winding down of the fund and all its assets.
It is our intention to provide an additional communication over the coming
weeks to update investors on our progress towards reaching a decision on the
most suitable way forward for the fund.
Casper Hallas
Scandium Asset Management A/S
