Investors with AIG plan legal action

Hundreds of wealthy investors who were denied access to their money after AIG Life closed the fund that they were invested in are considering mounting a series of legal actions against the banks which advised them.

AIG closed its Enhanced fund to withdrawals last month after fears of the insurer's collapse caused a run on the fund. Days later, it announced it would be closing the fund altogether, telling investors that they could get back a minimum of half of their money now, but would have to wait three years if they wanted to be reclaim the remainder without loss. If they ask to cash in their entire investment in December, they stand to lose as much as 25 per cent.

The fund had been advertised as a "life insurance bond that offers investment in a choice of low-risk funds", and was designed to "allow quick and easy access to your investment, which is normally free of charge".

Investors in the fund – which include the television presenter Jeremy Clarkson – are furious about the fund's closure. They are now mobilising themselves to take action against the banks which advised them to invest with AIG Life.

One investor has set up a website for those who have been affected – www.aigvictims.org – and is organising meetings with fellow AIG customers to discuss how to proceed. The next meeting is being held this evening in London.

The action group already has more than 200 members, some of whom have agreed to each contribute £100 to pay for an advert in a national newspaper, with a view to attracting more members.

On their website, members claim that banks such as UBS, Barclays Wealth, HSBC and Coutts are among those who recommended the bond. Lawyers are already posting on the website offering to take up the case.

High net worth individuals had some £5.5bn invested in the Enhanced fund, which was primarily invested in corporate bonds – including those of the troubled British bank HBOS. Many of the bonds would now be worth much less than the fund paid for them if they were cashed in early, which is why the fund is only allowing investors to reclaim 50 per cent of their money at the moment.

Those who want the remainder as soon as possible have been told to expect a loss on the second half of their investment. However, if they allow the remaining money to be invested in a new fund, they have been told they are guaranteed to at least get all of their money back – and may also receive some investment return.