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FSA taking closer look at split-cap &#39magicians&#39

The FSA has stepped up its probe into the split-capital investment trust sector by formalising its investigation of alleged collusion between a number of fund managers.

Following preliminary inquiries which began in May, the regulator has written to around a dozen investment firms in a move to determine whether a “magic circle” of fund managers colluded to invest in each others&#39 funds to prop up their share prices.

The investigation, which could last for at least a year, is likely to focus on the major players in the split-cap sector, principally Aberdeen Asset Management, Exeter Asset Management, Gartmore, BFS and Framlington.

Also thought to be under the microscope are advisers who sold many of the shares in the trusts. If found guilty, the companies involved could be fined, ordered to pay compensation or have senior staff banned from the industry.

Any such move would come as yet another blow to Aberdeen, in particular, which is trying to persuade the FSA to approve a financial uplift package for investors in its progressive growth fund.

It also faces more problems with the news that the Murray extra return investment trust, which it manages, is struggling. In the year to the end of August, the trust&#39s gross assets fell by more than 14 per cent, with the net asset value of its shares down by 63 per cent.

Despite the bad news, Aberdeen has launched its first hedge fund, which is expected to invest purely in Japanese stocks.

Aberdeen was unavailable for comment.

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