Investors warned over Connaught Income Funds

What are our concerns?

In the literature we have seen, the Connaught funds are described as ‘very low risk’ and ‘low risk’. It makes comparisons between investing in them and putting your money in high street bank and building society accounts. We believe this is misleading.

Connaught’s marketing material compares the returns on its funds with fixed-rate notice bank and building society accounts. However, customers need to be aware that these bank accounts have stronger investor protections should anything go wrong and offer lower risks to your money than there is investing in the Connaught funds.

Furthermore, these funds offer a quarterly ‘fixed income payment’. Although, the probability of you receiving this payment depends significantly on the performance of the investments within the funds. We believe this is not explained well enough to investors.

Connaught also offers an ‘additional guarantee on the income’ within the funds, but it is unclear if investors would be able to understand what this guarantee is.

Who does this affect?

Consumers who are considering investing, or have invested in the Connaught funds, whether directly, though a Self Invested Personal Pension (SIPP), Small Self Administered Scheme (SSAS), an investment bond or an offshore investment bond.

What should you do next?

  • Make sure you and your financial adviser or stockbroker understand how the funds work and what investing in them means for your money.
  • Always make sure your financial adviser is qualified and regulated by the FSA (please check the FSA Register).
  • Discuss with your adviser whether there are any other products that would meet your needs and give you the protection of the Financial Services Compensation Scheme and Financial Ombudsman Service.

Investing in these funds is only appropriate if you are comfortable with the particular risks involved.

March 2012 update

On 7 March 2012, Connaught Asset Management, which are not regulated by us, decided to suspend its Series fund 1. The fund will be suspended whilst a review is completed to establish the true value of the fund and determine whether there is any shortfall in money held in the fund.

On 13 April 2012, Connaught contacted its investors to inform them that the fund was unable to pay the scheduled quarterly interest payment to investors.

April 2012 update

On 26 April 2012, Connaught announced that it had suspended its Series 2 fund.

June 2012 update – Series 1 and 2 funds to close

On 6 June 2012, Connaught announced that its Series 1 fund is being wound down, with a potential loss of at least £10m, or approximately 10% of the value of the investments of the Fund.

Furthermore, on 13 June 2012, Connaught announced that the Series 2 fund would also be wound down.

If you have any further questions at this stage you should contact the adviser that sold you the investment.

July 2012 update – Series 1 and 3 Funds

On 13th June 2012, Connaught Asset Management took control of the portion of the loan book held by Tiuta International Limited, the specialist partner to the Connaught Income Series 1 Fund. On 5th July 2012, Tiuta International Limited was placed into administration. BDO have been appointed as the administrators.

Due to increased levels of redemption requests, the Connaught Series 3 Fund was suspended on 5th July 2012, and it will enter an orderly wind down process.

For both funds, investors should contact their financial advisor with any questions.

July 2014 update – Series 1 Fund

The Financial Conduct Authority (FCA) is focused on securing fair redress for those who invested in Connaught Income Funds. At this stage, we believe that a negotiated settlement to address investor losses from the Connaught Series 1 Fund represents the best course of action for all parties. Therefore, for a limited period, we will support the parties concerned in an attempt to reach a negotiated resolution with a view to obtaining appropriate redress for investors as soon as possible. 

We encourage the parties concerned to engage constructively with us and each other for this limited period to avoid potentially lengthy and costly alternatives to a negotiated settlement. This is a voluntary and confidential process, and so we will be unable to comment further on its progress until an agreement is reached or negotiations break down.