Another split-cap fails as Aberdeen axes third fund

Investors in split-capital investment trusts were facing more misery yesterday, after a third fund from Aberdeen Asset Management announced plans to liquidate its assets.

Shareholders in Aberdeen's Leveraged Income trust will be asked to vote on proposals from the trust's board to wind up the fund, after stock market falls left it owing more than the value of its assets.

Investment trust shares were the biggest fallers yesterday, with some prices falling as much as 82 per cent. The spread between bid and offer prices was as high as 98 per cent, as finding buyers for shares became almost impossible.

Ben Yearsley, investment manager at Hargreaves Lansdown, said: "Forced sellers are trying to get rid of their shares and market-makers do not want to get caught with bad stock on their books. They have to make a market, but are doing it at the lowest price possible. We haven't seen an end to this yet."

The £24m Exeter Enhanced Income fund yesterday joined the list of funds to suspend its shares. Some 13 split-capital trusts in the sector are in trouble, cancelling dividends and breaking lending agreements. Two of Aberdeen's 19 split-capital funds are in liquidation.

As more funds run into difficulties and further liquidations seem likely, market- makers are being extra cautious and are keeping bid prices very low. John Newlands, a trust analyst at Williams de Broe, called the sector a "blood bath". "At the junk end of the sector, the bad news will continue. With each fund going in to liquidation, the portfolio has to be sold at firesale prices, so the whole thing spirals downwards," he said.