An error made by a number of adviser platforms made it look as though an investment in several model portfolios had dropped by 90 per cent when no such decline had occurred.
The incident - which affected clients of the Aviva, Abrdn’s Wrap, and Quilter platforms - involved a pricing error in relation to the shares of the £1.6bn BH Macro investment trust.
On Febraury 6 the trust announced a share split, with investors receiving 10 new shares for every one share they previously owned.
So a shareholder with one of the sterling denomination shares priced at £43.10, would receive 10 shares at £4.30.
Representatives of both the Aviva and the Wrap platforms confirmed to FTAdviser that clients portfolios showed the lower share price after the split, making it seem as though clients had lost 90 per cent of the money invested in BH Macro.
At the time of writing, the problem had not been resolved on the Aviva platform.
A representative for Aviva, said: “We are aware of an issue with the way BH Macro shares are showing on the Aviva platform, following the new share award, and the value showing incorrectly. We are working with our technology providers to correct this.”
A representative from the Wrap platform said they have resolved the issue, but added: “In accordance with Mifid II, a 10 per cent drop letter was issued to customers due to the artificial inflation and subsequent correction in the price of the stock. We are in communication with the discretionary managers affected.”
Abrdn said only a “small number” of clients were affected.
A representative from Quilter confirmed to FTAdviser that a number of its discretionary wealth manager clients were affected by this, but that the matter has been resolved and no 10 per cent drop letters have been sent.
The government announced at the end of December that the 10 per cent drop rule had been scrapped. But the change in the regulation took effect on the same day that the issue occurred with BH Macro shares.
All three platforms are run on FNZ technology.
Listed companies engage in share splits in order to improve the liquidity of a stock.
For example, retail clients often have monthly direct debits for a fixed amount, if the price of an individual share is high, it may exceed the amount of a direct debit, or enable a client to buy only one share at a time.
This reduces the pool of available buyers of a stock, reducing liquidity for sellers.
BH Macro is an investment trust that invests in the hedge fund strategies of its parent company, Brevan Howard.
The minimum investment size required to place capital directly with a hedge fund is usually much larger than the portfolio of an advised retail client would be able to undertake.
Mike Barrett, a director at consultancy firm the Lang Cat, said: “These type of transactions are often bespoke one-off exercises, and as a consequence will often require manual interventions.
"As always, communicating what is happening in a timely manner to both advisers and their clients will be the most important part to get right.”
david.thorpe@ft.com
