Up to 50,000 small investors in a range of Barings unit and investment trusts worth £1.3bn were yesterday given assurances that their funds are safe, despite the collapse of the merchant bank itself.
Experts said that in both cases the legal status of the trusts meant that they are ring-fenced from any potential claims against them by Ernst & Young, the administrators appointed to oversee the sale of Barings.
But more than £10m in cash parked by investment trust managers with Barings' banking arm, if only temporarily, was frozen by the administrators yesterday pending further developments.
Meanwhile, Baring Fund Managers, manager of the bank's 20 unit trusts, has temporarily suspended the issue and redemption of unit trusts in the schemes. The company said this decision would be reviewed regularly.
About £1.3bn is invested in 20 unit trusts and a further four investment trusts, which have slightly different rules.
Sheila Nicoll, director of legal and fiscal affairs at the Association of Unit Trusts and Investment Funds, said: "Baring Fund Managers is a separate company and is not in administration. The assets of unit trust holders, the ordinary investor, are held by a third party, in this case the Royal Bank of Scotland and Citicorp. There is complete legal separation between these assets and Barings itself and they are safe. The trustees are the legal owners and unit holders should be unaffected." It is thought unlikely that any Barings UK unit trust held cash with Barings itself.
A spokesman for the Association of Investment Trust Companies said: "An investment trust is in itself a separate company with its own shareholders. It holds title to its own assets. The beneficial owner of those assets is the shareholder, in other words the investor."