Investors in a so-called ‘death bond’ fund who have lost 40{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} of their original capital are raising money to sue the fund’s parent company, EEA Fund Management.  Meanwhile, the head of the EEA Investors’ Group has told FT Adviser that “financial advisers and other intermediaries are holding back information from investors”, due to concerns about professional indemnity insurance and mis-selling claims.

EEA Life Settlements Fund invested in second hand life insurance policies from elderly Americans.  It bought the policies at discounted rates in the expectation that they would receive a higher pay out when the policyholders eventually died.  The fund promised investors and their advisers returns of up to 8{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} p.a.  However the policyholders lived longer than expected and the cost of paying premiums to maturity soared.

The fund was suspended in November 2011 after the FSA’s managing director, Margaret Cole, described life settlement funds as “high risk toxic products” and possibly unsuitable for retail investors.  The EEA Investors’ Group was set up in 2013 to fight for shareholders’ interests.  It established the EEA Litigation Group in September 2015 which has now raised enough money to launch legal action to recover investors’ losses.

In June 2016 offers were tabled to buy the funds from shareholders at heavily discounted prices. Southey Capital is offering between 32{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} and 49{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} of the holding’s value, while Tullett Prebon Alternative Investments is expected to offer around 26{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53}.

Many advisers who recommended the EEA Life Settlements Fund, will have already received and may now be facing renewed complaints from their clients,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks.  “Notification under professional indemnity insurance of long running issues can be less than straightforward, and it is important that financial advisers are receiving correct and comprehensive advice in this area.

Recent reports of the ongoing saga have been published by The Telegraph and New Model Adviser.  The EEA Investors’ Group has published a press release about the fund sale process.