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Aberdeen unit trust has default holdings

Fifty of the holdings in Aberdeen Asset Management&#39s high-yield bond unit trust have defaulted or are close to default.

In addition to its Argentinian bond holdings, the unit trust also has exposure to split caps through holdings in Aberdeen preferred income and the real estate opportunities trust, which it formerly managed. Aberdeen has told IFAs that defaults are only to be expected and that the fund had outperformed its benchmark over one, three and six years. It says it is working to recover value in the long term.

The news opens a new area of difficulties in addition to the fund manager&#39s woes with technology funds and split caps. Also this week, it announced its intention to sell off its valuable property investment management arm and a board level shake-up.

Aberdeen Unit Trust Managers head of fixed interest Rod Davidson says: “While we have acknowledged that the high-yield bond sector has been extremely volatile over the past two years, this is perhaps not the right time for investors to lock in negative returns by redrawing their investments. At Aberdeen over the last 12 months, we have taken steps to enhance the investment process.”

Bates Investment Services head of research James Dalby says: “Personally, I would move out of the fund into a 50/50 fund with another management company. It is not very good for sentiment that it has exposure to split caps.”

•Property flotation, p12

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