BusinessCompany NewsMPs savage Aberdeen over split trusts

MPs savage Aberdeen over split trusts

Aberdeen Asset Management has been savaged over the crash of split capital investment trusts by MPs on the Commons Treasury Select Committee.

Chris Fishwick, its most highly paid director in charge of the trusts was criticised for failing to attend the hearing and for explaining what had gone wrong – Fishwick had to attend a number of meetings brought about by ‘difficult’ market conditions.

Committee chairman John McFall asked chief executive Martin Gilbert: ‘Can you understand why thousands of Aberdeen investors around the country, who have lost their life savings, feel anger when they see the director responsible receiving or benefiting from £7m during a period in which the funds he managed collapsed in value?’

The company is accused of omitting its most recent failings from a memorandum on the crisis submitted in evidence the day after it announced one of its splits, Media and Income Trust, was in talks with its bankers after admitting being in breach of the terms of a loan.

MPs were most critical of the firm’s claims that zeros, the capital growth part of the investment trust, were ‘low risk’ – compared by one executive at the height of sales to government gilts.

And they questioned the practice of ‘cross-investment’ between trusts, which increased losses when the market collapsed – one MP compared it to pyramid selling, another said it was ‘the unacceptable face of capitalism’.

The company denied misselling – although it admitted at one point that advertisements ‘were not as good as they should have been’.

But chief executive Martin Gilbert insisted zeros were widely considered ‘low risk’ at the time and labelled criticism ‘hindsight’.

The company blamed the longest bear market since the 1930s for their woes, promised do what it could for distressed funds, and defended investing in other trusts.

McFall, however, criticised the company’s ‘vague’ replies to questions, demanded more information in written evidence and said witnesses could be summoned back for more cross-examination in the autumn.

Gilbert, on leaving the hearing claimed to have lost £20m himself, criticised MPs’ comments as ‘inflammatory’, and added that he was ‘surprised at how hostile a reception we got’.

FSA managing director John Tiner said in later evidence that allegations against a handful of firms of collusion in a magic circle were being investigated and said some products sold were clearly not ‘low risk’.

He denied the watchdog was not acting speedily enough

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