The return of split-capital investment trusts – and two to buy now

Split-capital investment trusts fell out of favour after a scandal in the early 2000s. But now they're back. Here are two worth a look.

Bovis Homes is among the key holdings of the Aberforth Split Level Income Trust
(Image credit: Credit: Colin Palmer Photography / Alamy Stock Photo)

It is more than 15 years since the split-capital trust scandal broke. Up to 50,000 investors lost money after investing in the late 1990s in trusts that were described as low-risk, but turned out to be anything but. These trusts had share capital divided between zero-dividend preference shares (“ZDPs” – see below), whose value accumulated year by year in fixed steps during a limited life, and ordinary share capital, sometimes further divided into income and capital shares. In the 1990s, all sets of shareholders prospered. But the 2000-2003 bear market often wiped out not only the ordinary shareholders, but also the preferred shareholders.

The aftermath of the crash

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.