Aberdeen Asset Management says Asian storm is dying down

Martin Gilbert sees brighter days and hails wisdom of Scottish Widows deal

Aberdeen Asset Management boss Martin Gilbert yesterday said his firm’s takeover of the venerable group Scottish Widows Investment Partnership (Swip) helped cushion the fall-out from the emerging market slump last year – as he predicted that Asia’s latest crisis had finally “bottomed out”.

Aberdeen bought Swip two years ago from Lloyds Banking Group in a £650m deal. The division’s assets under management dropped last year by £8bn – far less than the £25.5bn of outflows suffered by Aberdeen, thus helping to smooth company’s revenue woes.

“The Swip acquisition has been incredibly successful for our business, and if we hadn’t done the deal our earnings would be down from what we are showing now,” Mr Gilbert said. “It was a well-timed acquisition for our company.”

However a much heralded tie-up between Aberdeen and Lloyds to sell Aberdeen funds through Lloyds branches has fared less well.

Mr Gilbert said concerns from retail banks about selling products to customers due to regulatory concerns had prevented the partnership from achieving its aims: “Generally they’re being very cautious about what they can sell,”

Despite forecasts 2016 would be a dismal one for the fund group’s revenues, the chief executive remained resolute in backing a return to form for stock markets in the Asia-Pacific region.

Around a third of the company assets under management come from Asia and in equities alone, the company has about one-third tied up in Asia-Pacific stock markets and a further third in emerging market equities – leaving it heavily exposed to the slump in sentiment towards the regions.

The fall in the region’s stock market, heightened by the collapse of the Chinese market in August, slashed Aberdeen’s assets to £283.7bn from £324.4bn last year, it said. The firm has now recorded 10 consecutive quarters of outflows, putting pressure on the Scottish group and triggering a 4.5 per cent fall in shares yesterday, down 15p to 319.9p.

“They will improve – we won’t see another August and September like we did. Things have bottomed out and people are not as negative as they were. It’s tough time. We just have to wait for emerging market to come back into fashion,” Mr Gilbert said.

Martin Gilbert plans to stay on for another decade, to match Alex Ferguson’s retirement age

He added that it was “completely untrue” that he was trying to sell the company, after reports surfaced last month that he was engineering a sale.

The 60-year-old said he planned to stay on for at least another decade in a bid to match the retirement age of former Manchester United boss Sir Alex Ferguson, who stepped down when he was 72 years old.

“I have told the board I will give them two years’ notice before I go. I hope it will be an internal successor,” he said.

Net revenues rose 5 per cent to £1.17bn, while pre-tax profits weakened slightly to £353.7m from £354.6m in 2014. The company, which has more than £500m of cash on its balance sheet, boosted its full year dividend 8 per cent to 19.5p.

Cutting costs, including putting an end to the firm’s sponsorship of the Cowes sailing regatta and not replacing exiting staff, have helped to take the edge off the profits dip, Mr Gilbert said.

Investors, especially sovereign wealth funds, pulled £16.4bn from the business during the period. Aberdeen has a powerhouse emerging markets business in Singapore, led by Hugh Young, but has been weighed down by the sluggish performance in the region.

There was further trouble last week as Chinese shares plunged more than 5 per cent on Friday, the biggest loss in three months, as the regulator signalled it would clamp down on leveraged share purchases.

Hugh Young: Aberdeen’s Mr Asia

Despite Aberdeen’s strong presence in the City of London and the granite city itself, the centre of power for a big chunk of its business lies thousands of miles away in the hands of Hugh Young, a Singapore-based fund manager. The 56-year-old, who has steered the company’s emerging market strategy for the past 30 years, is one of the chief architects of the company’s success and is responsible for running about half of the company’s assets.

Mr Young was appointed to the board of the group in 2011 after joining in 1985 and now manages about 480 people across offices in China, Hong Kong, Taiwan and Thailand – making Young’s division a stand-alone business in its own right.

The boss, who runs the division called Aberdeen Asset Management Asia, is also suitably recompensed for his troubles – in 2013 he earned £5.1m, just £5,000 less than his own boss, Martin Gilbert.