Aberdeen assets fall £40bn in past year

Aberdeen Asset Management CEO Martin Gilbert

Fund manager Aberdeen Asset Management, which specializes in emerging markets and Asia, said its assets under management fell from roughly £324 billion to £284 billion in the year to September 30 and that next year’s trading would also be tough.

Investors remain nervous about ongoing market turmoil and economic prospects in Aberdeen’s key international markets and have pulled money out of funds that invest in those regions of the world.

Aberdeen’s problems have been made worse by low oil prices which have led to redemptions by sovereign wealth funds in some oil-producing countries to help make up for a fall in earnings from exports.

Despite the outflows, Aberdeen, led by chief executive Martin Gilbert, said net revenue jumped 5% to £1.2 billion and underlying profit before tax rose to £491.6 million from £490.3 million.

Final dividend was 12p per share, up from 11.25p, making 19.5p for the full year versus 18p a year ago.

Aberdeen’s share price fell 4.6% after its results were announced, giving the firm a current stock market value of about £4.2 billion.

“Net outflows were £33.9 billion and the main contributing factors were weak investor sentiment towards Asia and emerging markets …” said Aberdeen’s chairman Roger Cornick. “We have also been impacted by our share of withdrawals by sovereign wealth funds.”

Aberdeen said that in stocks alone, net outflows rose from £13 billion in 2104 to £16.4 billion this year.

“A major factor has been asset allocation changes by clients, largely on the basis of their views on macroeconomic factors,” said Aberdeen.

“In particular, investors have reduced exposure to Asia and emerging markets. This was a persistent theme during the year, but was more pronounced in the final quarter, with the industry experiencing the worst quarter for outflows from this asset class since the global financial crisis.

“This asset allocation theme was compounded by a number of sovereign wealth funds reducing their market exposure in response to the low oil price.”

CEO Gilbert said: “These solid financial results reflect, in part, the work we have undertaken to diversify the business and maintain a strong balance sheet.

“The cyclical correction in Asian and emerging markets and resulting negative investor sentiment has, as expected, led to further flows from our equities business.

“While we believe the current weakness may have some way to run, the long term fundamental attractions of investing in these high growth economies remain compelling for patient investors.

“We continue to rebalance and diversify the business, to focus on managing our costs and to generate cash and this has helped to mitigate the impact of the outflows we’ve seen.  We intend to continue with this strategy …”

To help diversify its business, Aberdeen bought Edinburgh-based Scottish Widows Investment Partnership from Lloyds Banking Group last year and has bought a number of other asset management firms. The firm said it would continue to look for acquisitions.