Investor backlash over painful splits

INVESTORS in split-capital trusts run by Aberdeen Asset Management are considering legal action, claiming they were victims of mis-selling. Stephen Alexander, a partner at central London solicitors Class Law, says dozens of investors have contacted his firm. 'Split-capital trusts were sold as low or medium-risk products. A great many are in trouble,' he said.

Split-capital trusts offer two shares - one benefits from dividends and the other from capital growth. Many trusts invested in each other, creating what critics describe as an unstable and volatile market.

The Financial Services Authority warned last year that trusts with the biggest cross-investments had borrowed against the value of the stakes. Many trusts are now worth a fraction of their initial value.

Alexander contacted Liberal Democrat peer Lord Newby, who has complained to Aberdeen about directors' bonuses.

He was particularly angered by the revelation that fund manager Christopher Fishwick took home £5m last year, though investors in some of the trusts he manages lost up to 90% of their money.

Newby claims that Aberdeen chief executive Martin Gilbert admitted two weeks ago that 'with hindsight' the risks of the split capital trusts might have been wrongly assessed.

Class Law has employed accountants BDO Stoy Hayward to gather evidence and City sources said Aberdeen's non-executive directors had requested an inquiry into the problem. The company, where Katherine Garrett-Cox is £1m-a-year head of investments, said it was 'unaware of an inquiry'.

Alexander said Class Law is also poised to launch a negligence claim against the FSA over its supervision of Independent Insurance, which collapsed last year.