Gloomy stock market conditions saw investors pull more money out of Aberdeen Asset Management’s funds in the final three months of last year, and the firm predicted more volatility in the months ahead.
Speaking ahead of the group’s annual meeting, chief executive Martin Gilbert said much of the decline in funds under management was “self-inflicted” as it moved to reduce its exposure to emerging market equities, adding: “We just have to sit here and wait for sentiment to recover.”
Gilbert, pictured below, also said Aberdeen was making “good progress” in completing its purchase of Edinburgh-based rival Scottish Widows Investment Partnership (Swip) from Lloyds Banking Group. The £550 million deal, unveiled in November, is still awaiting regulatory approval but is expected to be finalised by the end of March.
Mark Williamson, analyst at Peel Hunt, said: “While the market has heralded the Swip acquisition as the solution to Aberdeen’s over-reliance on emerging markets, I believe that all it does is add a whole host of new problems.”
Describing the update as “disappointing”, Williamson said the majority of funds being acquired were “low-margin life company assets that are in outflow”.
However, Peter Lenardos at RBC Capital Markets noted: “We continue to believe that consensus is taking an overly-bearish view of Aberdeen’s financial prospects, and is not incorporating the diversification and operating margin upside that the Swip transaction should deliver.”
At the annual meeting, 11.2 per cent of shareholders voted against Aberdeen’s remuneration report, which saw Gilbert’s total pay package rise to £5.1m last year.
The group’s assets under management fell to £193.6 billion in the three months December, its financial first quarter. That was down from £200.4bn in September and below the £197.1bn forecast by analysts at Numis.
Although the amount of money being pulled out by clients slowed to £11.2bn, from £13.2bn in the previous quarter, new business wins also fell amid negative sentiment towards Asia and emerging markets. As a result, net outflows accelerated to £4.4bn, but Gilbert said the firm has a strong pipeline of new business, which is expected to deliver an extra £2bn of assets early this year.
He added: “Business flows reflected the continuing negative sentiment towards Asian and emerging markets generally, particularly later in the quarter.
“However, we believe the fundamental attractions of the Asian and developing economies and companies that we invest in are compelling. We are confident that we will sustain our record of long-term outperformance.”
While analysts at Shore Capital agreed that markets such as Brazil, China and India will inevitably suffer short-term volatility, the broker said they present long-term opportunities thanks to a growing middle class eager to buy savings and investments products.