Aberdeen Asset Management hit by emerging markets

Chief executive of Aberdeen Asset Management Martin Gilbert. Picture: Neil Hanna
Chief executive of Aberdeen Asset Management Martin Gilbert. Picture: Neil Hanna
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ABERDEEN Asset Management saw its shares slump by almost 8 per cent today as its exposure to volatile Asian markets cost it dearly.

In an interim statement described by one analyst as “a grey update from the Granite City”, the firm said it had ­suffered net outflows of almost £10 billion as institutional investors continue to reduce exposure to Asia and emerging markets.

During the third quarter of its financial year, Aberdeen’s assets under management fell 7 per cent to £307.3bn, hit by those negative market conditions and currency movements.

Chief executive Martin Gilbert warned that the outlook would remain difficult, adding that current market conditions “do not favour Aberdeen’s investment style”.

He said the firm would retain its emerging markets focus. “We are long-term boring investors buying quality companies, and that doesn’t work in the momentum-driven liquidity market that we’re in,” noted Gilbert. “We won’t change our investment style, so we need to ride this out. It’s painful.”

The firm said it had £4bn in new commitments and mandates awarded but not funded by the end of the ­quarter.

Shares in the group closed down 30.4p or 7.6 per cent at 369.1p, just above their session low.

Mike van Dulken, head of research at Accendo Markets, issued a noted entitled “a grey update from the Granite City”, saying: “Traders in Aberdeen Asset Management shares are jumping ship almost as quickly as investors did from its funds in Q3.

“Management blames ‘market conditions and FX movements’ and ‘low ­margin outflows from certain fixed ­income products’ for a large proportion of the decline, and while it highlights diversification, new launches and cost management this is clearly not compensating adequately with extraordinary global monetary policy still proving a hindrance.

“Furthermore, the outlook looks little to get excited about, especially with the prospect of rate rises in the agenda on both sides of the pond.”

Peter Lenardos, an analyst at RBC ­Capital Markets, said he expected ­further market downgrades on the back of the worse-than-expected outflows of £9.9bn.

Following an analyst and investor conference call with Gilbert and Aberdeen’s chief financial officer, Bill Rattray, Lenardos said: “In the statement this morning Aberdeen indicated it had a pipeline of £4bn in mandates won but not funded.

“Aberdeen indicated that previously its pipeline was around £2bn.

“However, as we indicated in our [earlier] note… Aberdeen did not indicate when this is expected to fund, nor does it disclose the level of redemption requests received but not actioned at the end of the quarter.

“Aberdeen noted that a large portion of its pipeline is for property mandates, and that it is becoming increasingly more difficult to deploy capital into property because of elevated prices.”

RBC has an “underperform” rating on the shares and a 375p price target.

Gilbert said a rise in US interest rates sooner rather than later could restore confidence in emerging markets.

Aberdeen’s purchase last year of Scottish Widows Investment Partnership (Swip) from Lloyds has cut some of its reliance on emerging markets.

Gilbert added that the group still planned a share buyback of up to £100m this year.

He said: : “We would rather buy the shares at a cheaper level than at a higher level.”