Dear Sir, I feel obliged to write about the continued crisis in the split capital investment trust...
I feel obliged to write about the continued crisis in the split capital investment trust market and the false prices that are being quoted by the market makers.
This has been highlighted by the admission by the board of the Gartmore Monthly Income Trust that if it has to liquidate its cross holdings ' which forms the bulk of its assets ' then there will be insufficient monies, after paying off the bank debt, to pay the zero holders their entitlement to 109.37p and nothing for the income share holders.
This situation has been the case for some considerable time, it has been impossible to deal in any substantial size, and that the quoted price in the market is for in some instances as little as 1,000 share lots.
Try and deal in a 10,000 lot and see what happens, you either get offered a prohibitive discount to the quoted price or will not be able to deal at all.
It is interesting therefore when you see trades in their millions going through the market. When you look behind these trades you find that it is the 'usual suspects' ' the term we have given to those investment houses involved in the Golden Circle trading between themselves. Not only between themselves but between trusts that they manage.
Evidence of this is in the public domain and quite simple to uncover.
I hope that the FSA in its investigation will ask the question as to what collusion there has been been to keep prices artificially high.
Nigel Chapman Senior Investment Manager Phillip Securities (UK)
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