IMA revealed as mystery frontrunner in Lifemark rescue talks

The Investment Management Association (IMA) has confirmed it is leading efforts to shore up troubled Keydata-backer Lifemark, as part of a bid to recoup the fund management sector's £233m FSCS bill.

Parties close to the deal are believed to be eager for an arrangement to be struck with the FSCS which could see some of the industry's levy repaid if Lifemark can be rescued and start paying out to investors.

Guy Sears, director of wholesale at the IMA, says he has been in talks with Lifemark's provisional administrator KPMG about providing liquidity to the Luxembourg-domiciled life settlements vehicle.

Talks have been ongoing since the FSCS announced it would hit the whole investment industry (including advisers and fund managers) with a record £326m interim levy five weeks ago. This was to help compensate investors for the failure of firms primarily Keydata.

Sears says much depends on how and when the value of Lifemark's assets can be realised.

"If it takes eight to 10 years to get the money back then that is too long," he says.

Threadneedle's head of distribution, Campbell Fleming, who sits on the IMA board, has also played a key part in the discussions, according to sources close to the situation.

IMA members were furious at having to pay £233m of the FSCS's investor compensation bill, primarily caused by Keydata's 2009 collapse. This is despite Keydata falling in the investment intermediation sub-class, not fund management.

Sears says some member firms asked the IMA to investigate supporting Lifemark with a loan to help the fund right itself and enable them recoup some of the levy.

Lifemark is struggling to pay the $4.5m a month needed to maintain the premium payments on its portfolio of traded life settlements.

Sears says: "It is not the most attractive set of circumstances to think about asking people to stump up more money when they have just paid out £233m.

"We are running the numbers. These are pretty sophisticated assets to look at. If people don't die when expected then you have to keep paying the premiums.

"Traded life settlement policies are very, very variable assets. They are not straight forward at all. I wonder how much investors knew they were investing in people dying."

But Sears says a fire-sale of Lifemark's assets would be " the least favourable outcome".

"I don't think anyone would be scrambling for their money back in one year, rather than waiting two years, if that meant losing 30% of the value of the assets."

However, he stresses no rescue is "imminent" from the IMA. He intends to use the full three months' extension to Lifemark's provisional administration, to "put in the time" to see if the fund can be made to pay.

"Within that time-frame things will either happen or not," he says.

"Our message is there may not be hope."

But Gareth Fatchett, partner at law firm Regulatory Legal which is acting on behalf of over 400 Keydata investors, says the IMA will want to protect its own interests which do not necessarily align with those of investors.

"Any rescue would need to be closely examined by investors.

"The practical position is that by the time any rescue occurs most of the fund rights will sit with the FSCS or IFA's insurers," he says.