The suspension on the EEA Life Settlements fund could be lifted in six weeks as proposals are made to restructure the fund.
Dealing in EEA Life Settlements was suspended in December 2011 after it was hit with unprecedented levels of redemption requests from investors following the FSA’s labelling of life settlement funds as high risk, toxic products.
Restructure plans have been sent to shareholders giving investors the option of holding continuing shares or run-off shares in the fund. The plans require 75 per cent majority approval from voting shareholders.
The board is “strongly encouraging” shareholders to vote in favour of the restructure otherwise it will consider appointing a liquidator.
Investors who elect for elect for continuing shares will continue to hold their existing shares in the same cell of the fund in which they currently hold shares with additional dealing restrictions. Any proceeds from the maturity or sale of policies will be re-invested.
They will not be able to redeem those shares for a 23-month lock-up period after the restructure, expected to take place on 1 November.
Those who elect for run-off shares will exchange their existing holdings for shares in a newly created corresponding run-off cell of the fund. Cash in these cells will not be reinvested but distributed to shareholders until proceeds from the final policy held in respect of each run-off cell have been returned.
Equilibrium Asset Management investment manager Mike Deverell says: “The regulator has to take some responsibility for this situation. Investors should been made aware of the risks of an illiquid fund, and when the FSA referred to life settlements as high risk and toxic, what it effectively did was force a run on the fund.”