Troubled Aberdeen Asset Management insisted yesterday that it is pushing ahead with a compensation scheme for investors in Progressive Growth Unit Trust, with a plan that could see those who suffered from the split capital trust debacle getting their all capital returned within three years.
The assurance came after weekend press reports that Aberdeen had abandoned the rescue plan due to concerns over its cost and that it might be forced by regulators to pay compensation to holders in split capital investment trusts that have collapsed.
AberdeenÂ's chief executive, Martin Gilbert, who first gave the compensation pledge three months ago, is due to be grilled by MPs at what is set to be a sparky hearing of the Treasury Select Committee on the split capital trust debacle tomorrow. Also due to appear is Chris 'Mr Splits' Fishwick, AAMÂ's investment director in overall charge of split capital trusts who recently resigned.
The company declined to comment yesterday on speculation that growing balance sheet pressures will force it to offload parts of its business.
City sources believe AAM may opt to sell its Â£4.45 billion retail unit trust and OEIC business to cut the Â£250 million debt pile. However, no statement on current trading or on strategy is expected before 2 December, when it unveils full-year results.
The Progressive Growth Unit Trust was set up in August 2000 to provide capital growth from investment primarily in zero dividend preference shares. It was marketed as lower risk.
But the Â£76 million unit trust plunged in value as the split capital debacle deepened, and units have now fallen 73 per cent since launch. More than 70 per cent of the portfolio was invested in the shares of split capital trusts.
A compensation package is proving hugely complex as well as expensive, as it has to satisfy both the Financial Ombudsman and the Financial Services Authority. The scheme on which AAM is working would ensure that investors got their capital back within three years.
Fishwick angered MPs by failing to appear before the Treasury Select Committee on the split capital crisis back in the summer. But he intends to mount a vigorous defence, insisting that no fraud was involved, that the funds fell victim to a unique convergence of improbables and that the investment trusts made clear the nature of the investment and the risk involved.
AAM also dismissed reports yesterday that Slaughter & May, legal advisers to the Real Estate Opportunities Trust Fund, which had been managed by AAM, were planning to sue Aberdeen for up to Â£100 million after the fixed income portfolio collapsed. 'If any action were to be launched, the companyÂ's interest would be defended vigorously,' said a spokesman yesterday.
TomorrowÂ's hearing is also expected to grill senior executives of Brewin Dolphin, the stockbroker which actively encouraged clients to buy split capital trusts. Also up for questioning is the agency broker Collins Stewart, run by the combative Terry Smith. Collins Stewart is understood to be in the middle of sensitive talks over an aquisition in the Far East.
(source: The Scotsman)