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If I invest my money in a bank account, the bank could go bankrupt and I could lose all my money - well, at least I could have in the distant past, before government deposit insurance was invented.

If I invest my money in an share index tracker fund such as Blackrock's Aquila Life UK Equity Index Fund, I could lose all my money if all the companies forming the index become worthless at once, which is extremely unlikely - or if the mechanisms used by the index tracker provider (Blackrock) suddenly fail to track the index and instead track a zero line, which let's assume is just not going to happen.

Sure, if the stock market crashes, I could lose a lot of my money, but I shouldn't lose all my money.

So I think the only other way in which I could lose all my money invested in an index tracker would be if the index tracker provider itself went bankrupt. But how likely is this, and if it happened would I lose all my money?

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  • Please add your country tag to the question.
    – JTP - Apologise to Monica ♦
    Commented Aug 22, 2014 at 19:42
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    Is Blackrock an investment manager or an index provider? Examples of investment managers in the US would be Vanguard, Charles Schwab, Fidelity, etc. Examples of index providers would be MSCI, Dow Jones, Standard & Poor's, FTSE, etc. Are you asking about the former or the latter?
    – dg99
    Commented Aug 22, 2014 at 21:03

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The Financial Services Compensation Scheme says:

Investments FSCS provides protection if an authorised investment firm is unable to pay claims against it. For example:

for loss arising from bad investment advice, poor investment management or misrepresentation;

when an authorised investment firm goes out of business and cannot return investments or money.

Investments covered include: stocks and shares; unit trusts; futures and options; personal pension plans and long-term investments such as mortgage endowments.

An index-tracking fund provided by an authorised investment firm would seem to qualify in the cases where:

  • The firm goes bankrupt
  • The firm cannot pay what it owes you due to mismanagement

The critical points here then are:

  • Is Blackrock an authorised investment firm? (I would imagine almost certainly yes)
  • Are you investing in a product which the FSCS considers eligible?

I can't find anything easily to hand about FSCS on Blackrock's website, so I would imagine that you'd need to consult the documentation on your investment product to be sure.

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