Shares in Aberdeen Asset Management slumped nearly 20 percent on Wednesday after one of its clients said it was considering removing all its investments from the troubled UK fund firmÂ's management. Real Estate Opportunities Investment Trust (REO) said in a statement late on Tuesday it was reviewing AberdeenÂ's role as manager of around 543 million pounds of real estate and other assets.
The trust also said it had agreed a reduction in AberdeenÂ's fee on the income portfolio until the review had been completed.
The income portfolio was invested heavily in split capital investment trusts -- specialist funds, some of which have seen the value of their assets wiped out by heavy borrowing and big cross-shareholdings as markets have tanked. It has shrunk in value from around 333 million pounds in July 2001 to just 49 million pounds on October 11.
Shares in Aberdeen, the biggest player in the split cap market, have fallen so hard that they are now worth less than 10 percent of their value at the start of the year.
'As far as Aberdeen ... is concerned itÂ's business as usual, but we are aware of the intention to reposition REO as a property investment company, an area in which Aberdeen has considerable expertise,' a spokeswoman for Aberdeen said. REO is restructuring itself as a property investment trust.
Like other fund managers Aberdeen has been hit hard by falling stock markets and of even more concern to investors is the companyÂ's exposure to fall out from the collapse of a number of split capital investment trusts. Splits have multiple share classes offering either high levels of income or capital growth.
In one of the most high profile financial scandals of recent times, a number of splits, many of which were marketed as low risk, have seen the value of their assets wiped out by falling markets, high levels of debt and big cross-shareholdings.
A total of 19 splits have suspended trading and seven have called in receviers, leaving as many as 50,000 private investors facing big losses. Four trusts managed by Aberdeen have been forced into receivership.
The Financial Services Authority (FSA) is investigating possible mis-selling of splits and allegations of collusion between some fund managers to prop up share prices.
On Tuesday, the FSA told a parliamentary committee that uncoordinated regulation may have contributed to problems in the split cap sector. The FSAÂ's John Tiner said 'there may have been a gap in regulation' which allowed some splits to create what he earlier described as a 'contagious cocktail of cross investment and high borrowing.'
Aberdeen will give evidence to the committee for the second time next week with Chris Fishwick, who resigned from his role as the firmÂ's head of split cap trusts last week, expected to give evidence.