EEA Fund Management has warned investors they face “a huge capital loss” if they do not vote in favour of a restructure of its suspended life settlement fund.
The EEA Life Settlement fund 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. The board proposed a restructure last month, which would give investors the option of holding continuing shares or run-off shares in the fund if they vote in favour.
However, an update sent to investors last week said there will be “no alternatives available” other than to put the fund into administration if the restructure is not approved by shareholders.
Urging investors to vote in favour of the move, the message added: “If you do nothing and the fund goes into administration you will incur a huge capital loss.”
One investor, who wished to remain anonymous, accused the fund of scaremongering to pass the vote.
They said: “If the shares are correctly valued then why should investors suffer an aggregated loss?
“Clearly, there is a risk of a ‘fire sale’ if the fund is liquidated, however, one would hope that this would be within a reasonable margin, and many investors would be prepared to accept a small loss in order to achieve full redemption of their investment.”
EEA Fund Management chairman Simon Shaw says: “We felt it was in investors’ interests that we made starkly clear the potential consequences of doing nothing.”