Aberdeen spreads wings after market fears hit shares

Aberdeen Asset Management gained valuable exposure through coverage of the Scottish Open. Picture: Getty
Aberdeen Asset Management gained valuable exposure through coverage of the Scottish Open. Picture: Getty
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Fund giant Aberdeen Asset Management revealed a fall in funds under management below £210 billion as a result of closing off access to investors in its emerging market equities business and worries about a slowdown in China’s economy.

Chief executive Martin Gilbert yesterday insisted the fall-off in the quarter to end of June was “exactly as we expected” – although market watchers said the downtick in AUM to £209.6bn from £212.3bn in March was more than they had bargained for.

Analysts blamed both market volatility in June in addition to the group’s “capacity management” measures implemented for its Global Emerging Market (GEM) funds as the explanation for being wrong-footed. Rae Maile at JP Morgan Cazenove cited “worse than anticipated outflows in the period”.

Stuart Duncan at Peel hunt said: “Net outflows in the quarter were £3.1bn, and net inflows for the nine-month period now stand at £1.3bn. It is worth noting that £2.5bn of these outflows were in June, when market volatility was at its highest.”

Despite the drop in AUM, other analysts said the figures were “more resilient than expected” as fears over AAM’s strong emerging market position – particularly in China – were dismissed by its biggest clients.

Daniel Garrod and Toni Dang at Barclays wrote in a note: “We always argued that the institutional client base of Aberdeen resulted in flows and AUM being far more sticky than credited and we believe this has been confirmed.”

The Scottish investment house was hit by sell-offs in May after Goldman Sachs removed Aberdeen from its “buy” list due to unsettling economic news revealing growth in the Chinese economy could slow to 7 per cent. As a result, the group’s share price dived to as low as 360p last month from record highs of 492p in May, albeit the stock has largely recovered. The company’s shares last night closed down 5.3p at 402.5p.

Gilbert said the company expected the emerging markets to return to prior form. “One of our issues has been being underweight in the US compared to emerging markets,” he admitted. “Emerging markets have hugely under-performed the US market. So, if we see any mean reversion we would expect to see them doing pretty well sometime this year or next year.” But he also insisted that, while maintaining its emerging markets specialism, it would continue to expand its investor base – particularly in the US, where asset managers have less international diversity in their portfolios.

During the period, the company acquired Philadelphia-based Artio Global Investors. Gilbert also pointed to Aberdeen’s sponsorship of the Scottish Open, which was broadcast live in the US and shared a winner in American Phil Mickelson with the bigger, more high-profile Open.

“Half the world’s wealth is still in the US. Yet, if you listen to commentators, you’d think most of the world’s wealth was in China. The US is still a big focus for us in that most of the other big global asset managers in the US would be 75 [per cent domestic to] 25 international, while we would be 75 outside the US to 25.

“There’s room, as long as you don’t try to compete with them in US equities because they are all very strong in the US market. ”