Morgan pays pounds 200m in compensation

Morgan Grenfell Asset Management yesterday moved to close a chapter in the scandal surrounding the three troubled funds run by Peter Young, its maverick former manager, by promising that more than 80,000 individual investors in the trusts will receive about pounds 100m in compensation.

Payments averaging about pounds 1,200 per person will be sent on Tuesday to investors in the three funds, in which dealings were briefly suspended in September after trading irregularities were uncovered.

A further 90,000 investors, whose savings were held in 250 nominee accounts run on their behalf by a number of life companies, incouding Skandia and Aegon, are expected to receive compensation worth a further pounds 100m within the next few months.

The payments, to be made either by cheque or by topping up individuals' unit trust accounts, brings to pounds 400m the total cost of Peter Young's activities being shouldered by Deutsche Bank, Morgan Grenfell's German parent.

Frances Davies, head of pooled funds at Morgan Grenfell, said: "The compensation will be paid on the basis of a formula agreed with Imro [the fund management regulator]. We believe what has been agreed is full and fair."

She added that some 70 per cent of unitholders in the three funds, European Growth, Europa and European Capital Growth, had already requested top- ups rather than cash payments.

The mechanism for paying compensation involves setting August 1st 1995 as the starting date for assessing redress. This is the moment identified by Morgan Grenfell when Peter Young began his irregular trading.

Micropal, the specialist financial statistics provider, was asked to calculate average fund performance to September 1996 for trusts within the same sectors and operating on the same principles as the three affected Morgan Grenfell ones.

In the case of the European Growth Trust, the flagship fund run by Peter Young, its growth was just 2.05 per cent compared to the average growth of the benchmark funds of 15.4 per cent over this period.

Calculating the compensation to be paid involves comparing the price at which investors bought the units and when they were sold, or September 6 1996, ife held to that date.

Losses between the two prices will be repaid in full, Ms Davies said yesterday. Investors would also receive an "underpin" to their funds returning their money in full, inlcuding the bid-offer spread on the investment. Payments would be topped up by an additional 6 per cent compound interest payable from September last year.

The payments next week bring to a close another chapter in the saga which severely damaged the credibility of Morgan Grenfell. Earlier this month it was fined pounds 2m, plus pounds 1.5m costs for a vast catalogue of regulatory offences that allowed Mr Young to engage in his rogue trading practices.