The Split Capital Investment Trust Crisis

"Nearly three years after the crisis affecting the split capital investment trust industry, only now is it possible to understand at least some of the causes of the failures. With the true benefits of hindsight, this book clearly and effectively highlights the key interconnecting issues such as the narrow cross holding of heavily geared investment trusts by other heavily geared investment trusts, and the absence of sufficient transparency and control. In telling the story, this book now shows why neither the financial community in general, the market, the regulators, let alone the investor, were aware that the unforeseen catastrophic fall in equity markets would in turn wipe out historically stable zeros.

This important contribution to the debate looks forward too to the results of the current and proposed changes. Will the investment trust industry recover? Can it happen again? The best performing sector over the last 18 months has interestingly been split capital investment trusts and many recent individual investors have made substantial profits. There will always be a demand for investments that produce a better return than a bank deposit and are tax efficient. As this book so rightly concludes, the bottom line has to be to provide full information so that the risks can be properly assessed. I congratulate the authors."
—Angela Knight, Chief Executive, APCIMS