An announcement was made by the board to the Channel Islands Stock Exchange on 30 December, which confirmed approval had finally been received to restructure the fund.
Having received approval from investors in October, the restructure was delayed by the regulator in November when it asked for further information, including audited accounts of the fund for the 2012 financial year.
‘Death bonds’
The fund was suspended in November 2011 after the UK’s then regulator, the Financial Services Authority, issued draft guidance on traded life policy investments – branding them “death bonds”.
Following this suspension, the fund has remained closed to new investment and redemptions. However, the now approved restructure, which became effective on 1 January 2014, means investors will have the choice of slowly exiting the fund in so-called “run-off shares” or continuing to invest in the product in “continuing shares”.
Those who choose continuing shares will continue to hold their existing shares in the same cell of the fund in which they currently hold shares. If cash is generated from the maturity or sale of policies attributable to these continuing cells it will be reinvested in a new Irish-domiciled life settlements fund, or in other instruments which provide exposure to similar policies.
Share options
Investors who choose continuing shares will not be able to redeem them for a 23-month lock-up period from when the fund’s new structure becomes effective.
Meanwhile, if a shareholder elects for run-off shares they will exchange existing shares for shares in a newly created corresponding cell of the fund.
These run-off cells will not reinvest cash generated from policies that mature or are sold. Instead EEA Fund Management is proposing that every six months surplus cash will be distributed among shareholders.
In the statement released on 30 December, the board said investors representing almost 60% of the fund’s distributed shares had elected to enter into the new “run-off shares”.
