Standard Life had been promoting the fund as a home for investors’ money “when the short-term outlook for equities, fixed-interest securities and property is uncertain”.
This is despite the fact it is invested 44 per cent in asset-backed securities, the majority of which are toxic mortgage-backed securities, and only 12 per cent in cash.
This information had been left off the fund’s factsheet previously but on January 14, the day after the revaluation, the provider added this information to its marketing material.
The fund, which has around 97,000 investors, was revalued a number of times last year, once after Lehman Bros’ spectacular demise in September due to exposure in the company and secondly in November after Northern Rock announced it would run off Granite.
Standard Life launched a managed cash fund in September which it labels “an alternative investment with a higher degree of predictability” with little fan fare.
Also in September, fund manager, Louise McKenzie, was replaced by Greg Cookson but the firm denies this was related to fund performance or concerns about toxic assets.
Standard Life has agreed to remediate customers who invested in the fund between December 23, the date it says it decided to revalue, and January 13 but has not worked out how many people fall into this category, how it will repay their cash and more importantly when investors will receive it.
Advisers such as Syndaxi Chartered Financial Planning managing director Robert Reid believe Standard Life must have known the impact the toxic assets would have a long time before December 23 and as such says more people may need to be compensated.
He says: “Standard had to have known about this for some time and should have been diverting people away from this fund. Was it treating customers fairly to allow people to still shovel money in? It is good it will remediate some customers but this seems like a reaction to bad press, why did it not announce this straight away?”
Standard Life spokesman Paul Keeble says: “This reduction in unit price was made as soon as sufficiently reliable information was available. It has always been our policy to remediate customers who transacted in the fund between the dates discussed. However, this is a complex piece of work and we will communicate to advisers once we know how the process will work.”