Little respite from emerging market pressure for AAM

The chill winds from emerging markets show few signs of easing soon, Aberdeen Asset Management (AAM) admitted yesterday, as the fund manager posted flat profits and its tenth consecutive quarter of an outflow of funds.

Aberdeen Asset Management CEO Martin Gilbert. Picture: Neil Hanna

Unveiling annual pre-tax profits of £491.6 million against £490.3m, AAM chief executive Martin Gilbert said: “The cyclical correction in Asian and emerging markets and resulting negative investor sentiment has, as expected, led to further outflows from our equities business.”

However, Gilbert said that, while “the current weakness may have some way to run” he believed that the argument for investing in high-growth emerging economies remained “compelling for patient investors”.

AAM’s assets under management at the end of its financial year on 30 September totalled £283.7 billion, compared with £324.4bn in the year-ago period. Net equities’ outflows lifted from £13bn in 2014 to £16.4bn in the latest financial year.

The fund manager said this was exacerbated by a number of sovereign wealth funds cutting their market exposure in response to the low oil price.

The company has been diversifying its portfolio to reduce its exposure to emerging markets (excluding Asia), which now stands at about £26bn compared with £40bn three years ago.

Bill Rattray, AAM’s finance director, said: “We are still saying they will be quite volatile for a while, although maybe sentiment is just beginning to improve. It’s impossible to call the markets. I suspect it will be geared to when is the first Federal Reserve interest rate rise. It could go either way.”

On further potential outflow of funds from AAM, the finance director said it was difficult to predict but there was potential for further asset haemorrhaging “in the next two quarters”.

AAM completed a number of acquisitions in the financial year, the most notable being the Scottish Widows Investment Partnership (SWIP) deal.

Rattray said there had been about £50m of cost synergies achieved from the integration of SWIP, which included 150 job losses out of a headcount of 3,000.

He added that the fund manager would continue to focus on cost saving to protect profit margins in 2016, but it was expected to be mainly focused on back office and support operations. “We have not put a headcount number on it,” he said, regarding possible future potential job losses, but suggested it was likely to be much lower than the numbers lost in the past year.

AAM’s involvement in the takeover scene, and buffeting from the extended emerging market downturn, has led to some analysts to suggest it might be a takeover target itself.

“I guess you could argue that it is always possible to be seen as a target, but our job as management is just to get on and run the company,” Rattray said.

A final dividend of 12p makes a total payout for the year of 19.5p – up 8.3 per cent.