Peter Young, the fund manager at the heart of the Morgan Grenfell affair, trod the fine line between genius and eccentricity. A mathematician by training and a boffin by inclination, he impressed brokers and colleagues with the clarity of his thinking and his understanding of the high technology companies in which he invested.

Mr Young, and the European Growth Trust he managed, were star performers. The fund grew fastest in its category between 1994 and 1996. But this week it emerged that the fund's performance was illusory, based on exaggerated valuations of unquoted high technology shares. Deutsche Bank, Germany's largest and most powerful bank, was forced to inject £180m to keep the funds afloat.

"This has never happened in asset management in Deutsche Bank," said Mr Rolf Breuer, the bank's director with responsibility for the business. "From this embarrassment we all in Deutsche Bank will draw some conclusions."

Mr Young had entered the world of fund management after graduating from Oxford University with a degree in mathematics. He studied to become an actuary from 1980, but the highly strung young man never qualified, and he abandoned the attempt in 1989.

Until 1990 he worked at Equity & Law, first as a bond analyst and then as a fund manager in the continental European equities which were to make his reputation and then destroy it.

He then moved to Mercury Asset Management, where he was a fund manager in European equities. Two years later, in 1992, Mr Young joined Morgan Grenfell Asset Management, a Deutsche Bank company which was beginning a run of startling success with outstanding performance for its funds and a flood of new investors.

At first, he worked alongside Mr John Armitage in managing the European Growth Trust. When Mr Armitage left Morgan Grenfell Asset Management in May 1994, the rapidly rising Mr Young took over the fund.

The transition seemed smooth. European Growth continued to excel and persuade new retail customers to trust their savings to the fund. Mr Young brought new qualities: his technical grasp of new products earned him a reputation as one of the smartest investors in high-technology companies.

"Peter was one of the brightest people in the City," says a broker who knew him well. "Companies and analysts you took in to see him came away dazzled by his knowledge."

There was nothing to suggest that Mr Young's life was anything but normal. With his wife Harmanna, whom he had met on a residential driving course, he had two children, now aged four and two.

"He is very good with children," Mrs Young says. "He likes teaching them things and taking them to the Science Museum. They all have an interest in steam engines."

His salary and bonus, boosted by his funds' remarkable performance, was to allow him to sell his modest house in a row of terraces in Amersham, Buckinghamshire, and move into a newly built house costing £450,000 in a quiet close nearby.

But the pressure to excel appears to have pushed Young into backing his unshakeable faith in technology, and technology stocks, by circumventing rules on how much a fund can invest in a single company. He set up a complex skein of Luxembourg holding companies to conceal the scale of his holdings in obscure high-tech companies.

One explanation of this is that Mr Young, 38, had simply succumbed to the pressures of the highly competitive fund management industry, in which funds are closely identified with the personality of their manager. His behaviour had become increasingly bizarre: he talked to colleagues about his patent on a rocket launcher he had designed; and he developed a mathematical model to mimic the burrowing of termites.

Speaking yesterday at his Amersham house, his wife says his behaviour has been erratic for the past 18 months. "I would come down the stairs and he would be sitting in the dark with the children with the lights off and the curtains closed," she says.

He became obsessed with buying large quantities of food. "I asked Peter to go shopping," Mrs Young remembers. "He came back with 30 jars of pickled gherkins. My husband does not see that as strange."

Colleagues discussed Mr Young's increasingly eccentric behaviour and his wife recalls one of them asking whether he had had a brain scan. The worries grew when it became clear he had built up large holdings of obscure unlisted securities in European Growth's portfolio. Yet Morgan Grenfell Asset Management made no move to suspend Mr Young.

It was only last week that the company's senior managers became aware of the extent of the strains on Mr Young. In an interview last Thursday when European Growth's hidden losses were uncovered, he told executives that he sometimes felt strange. They were sufficiently concerned to arrange for him to see Dr Malcolm Cunard, a doctor retained by the company who said he would arrange for a psychiatrist to be present.

Mr Young spent yesterday with his lawyers, preparing his defence against the injunction which Morgan Grenfell took out to freeze certain of his assets. But he will have to contend with suspicions that his unstable behaviour is yet another deception.

The pressures on Young over the next few months will be enormous. But at least the bespectacled mathematics genius no longer carries the curse of the star performer.