Aberdeen unit trust to compensate some investors over split capital funds

The prospect of compensation for thousands of investors in stricken split capital investment trusts moved closer yesterday when Aberdeen Asset Management, one of the largest providers of splits, confirmed it would compensate some customers.

Aberdeen said it would guarantee that investors in its £44m Progressive Growth unit trust would receive at least their initial investment.

Aberdeen has been under pressure to make this promise from investors who are angry that the fund was marketed as low risk, but was last year reclassified as "medium risk".

The fund has lost 40 per cent of its value since it was launched in August 2000. Despite this, Aberdeen is confident that because split capitals are in such a parlous state, they are very likely to regain much of their original value.

The move will bring hope to investors in other split capital funds, a type of investment trust that offers both shares for growth and shares for income, who are also fighting through lawyers for compensation because they say the funds were mis-sold.

Those in the spotlight include split capital funds offered by BFS Investments and Exeter Investment. Exeter was singled out by the Financial Services Authority last month over advertising from October 2000 which said split capital funds had "more safety features than a Volvo". Philip Thichener, marketing director of Exeter, said: "We are looking at managing the fund so that investors' capital is recovered."

Tony Reid, chief executive of BFS, would not rule out compensation. But he pointed out Aberdeen's case is different because it is offering payouts on a unit trust that invested in split capital funds. The company has not said to date it will compensate people who invested directly in split capital investment trusts.

Unit trusts are regulated by the FSA and generally afford more protection than investment trusts, which – as a type of share – are governed by the Listing Rules.