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Aberdeen doesn&#39t flinch as MPs vent fury over split-caps

Aberdeen Asset Management enduring a grilling from the Treasury select committee last week over split-cap investment trusts, with MPs branding the firm&#39s marketing “the unacceptable face of capitalism”.

In his testimony before the Parliamentary committee, Aberdeen chief executive Martin Gilbert was unrepentant about the performance of the sector, saying stockmarket falls were behind the collapse.

Despite accusations from MPs of all parties that fund firms had at worst knowingly misled investors by marketing split-caps as low-risk products and at best demonstrated incompetence, Gilbert was steadfast in his claims of innocence.

He said Aberdeen was not the only firm to blame and insisted that low risk does not mean no risk. Gilbert refused to accept that, in hindsight, the split-cap sector had acted poorly in its investment decisions, saying hindsight was not an appropriate term.

Aberdeen marketing director for investment trusts Piers Currie told the MPs that nine out of the company&#39s 18 trusts are in distress and that 15 have less than 25 per cent in crossholdings.

Labour MP Dr Nick Palmer attacked Aberdeen&#39s ads which marketed a fund as “letting you sleep at night”, claiming it was the “unacceptable face of capitalism”.

Conservative MP Michael Fallon said the so-called magic circle operated by split-caps, in which many invest in each other, is in effect pyramid selling.

Labour chairman of the committee John McFall told Gilbert that letters he had received from constituents referred to split-cap managers as “sophisticated snake oil salesmen”.

Gilbert said: “It was not just us that thought they were low risk. The entire market thought they were. There are 36 other fund managers in the split-cap sector. It is not fair just to blame us.”


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