Fund manager Aberdeen Asset Management has rejected analyst claims that its £550 million acquisition of rival Scottish Widows Investment Partnership (Swip) will be a “disaster” after posting a fall in first-half profits as clients moved money out of emerging markets.
The purchase of Swip, from state-backed Lloyds Banking Group, officially completed last week, adding £134.1 billion of assets and turning Aberdeen into the largest listed investment firm in Europe.
However, Peel Hunt analyst Mark Williamson said the deal is “set to transform Aberdeen, but not in a good way”, pointing out that Swip manages a lot of low-margin mature life assets “and the funds are in steady outflow”.
He added: “I believe that time will prove the Swip acquisition to have been a disaster.”
But Aberdeen’s finance director, Bill Rattray, insisted the deal will bolster the group’s presence in property investments and broaden its fixed-income capabilities, at the same time as forging a link into Lloyds’ wealth management operations under an initial eight-year relationship.
Rattray, pictured, told The Scotsman: “All I can do is reiterate what we said at the time the acquisition was announced in November; we see this as an attractive deal that will materially enhance earnings per share.
“It’s got a good suite of product capabilities that will complement our own and gives an opportunity to build distribution.”
Aberdeen’s underlying pre-tax profits fell 3 per cent to £217m in the six months to 31 March, broadly in line with City forecasts. Excluding the funds brought in by Swip, assets under management dropped 5 per cent to £190.4bn.
Revenues were 2 per cent lower at £503.5m as the firm witnessed net outflows of £8.8bn, with clients pulling their money out of its core emerging market equity funds amid fears over the slowing Chinese economy.
Chief executive Martin Gilbert said: “Aberdeen has delivered a resilient set of numbers in this half year, given the difficult backdrop for emerging markets.
“Towards the end of the period, there were indications of some pick-up in investor sentiment towards emerging markets, although we anticipate that some uncertainty could remain.”
Rattray said the firm tried to slow down the rush into emerging markets funds last year by introducing a 2 per cent up-front charge on new investments in its Luxembourg- and UK-domiciled funds, “but then market sentiment turned”.
He added: “If we’d known a change in sentiment had been coming, we might have taken a different decision. We’re keeping pricing under review.”
Despite the dip in profits, investors will receive an interim dividend of 6.75p a share on 19 June, up 12.5 per cent on a year earlier, and Aberdeen signalled that they could be in line for a special payout as it seeks to return surplus cash to shareholders.
Rattray said: “We’re not being specific on timescales, but views are coming round to the fact that it will more likely be at the end of this year rather than any earlier.”