Shares in Aberdeen Asset Management have continued to fall as fears grow about the fund manager's financial strength.

The share price slipped 2 pence to 52.5p in early trade in Friday, and has now slumped by more than 40% since Monday, when the firm issued a trading statement saying it intended to cut costs.

The company has seen its revenues suffer as result of the slump in the world's stock markets, and concern is growing about the possible fall-out from an investigation into the selling of complex financial products called split capital investment trusts.

Earlier this week investment bank Schroder Salomon Smith Barney (SSSB) described the firm's financial position as "somewhat precarious".

"We believe that there are significant risks facing Aberdeen, not least the risk that it breaches its banking covenants and incurs fines from the split capital trust investigation," SSSB said.

Risky no-risk investments

Investors are worried that an investigation by the UK's financial watchdog, the Financial Services Authority (FSA), into split capital trusts will damage Aberdeen's reputation and finances.

Split capital trusts are specialist funds which issue different types of shares offering different types of returns.

Investors can choose to buy shares which aim to provide either a steady income or a riskier bet on capital growth.

Investors can also choose to buy shares called "zeros" which aim to pay out a set amount on a certain date.

Watchdog probe

But the falls in the world's stock markets over the past few years have put several trusts in trouble.

Three of Aberdeen's 19 split capital funds have called in receivers and a fourth is close to collapse.

The FSA, which has not named which companies it is looking into, is investigating claims that split-cap products were mis-sold.

It is also looking into whether some fund managers protected the share prices of some funds through collusion.

Bid approach?

On Friday, the Financial Times said that asset manager Jupiter and private equity house KKR had held talks with Aberdeen about a possible takeover.

But the paper said the talks broke down on worries over the total cost of sorting out the split-cap problem.