Aberdeen buyout helps plug balance sheet hole

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The Independent Online

The cash-strapped Aberdeen Asset Management, whose failed split-capital investment funds plunged the group into financial difficulty, yesterday sold off more of assets to help restore its damaged balance sheet.

Aberdeen's two Guernsey-based emerging markets debt funds, which hold assets of around £37m and invest in government debt from countries such as Argentina, Brazil and Russia, have been sold in a management buyout to Julian Adams, who currently runs the funds. He has set up his own specialist fund management company, Convivo Capital Management, using the Aberdeen funds that are designed primarily for institutional investors. Mr Adams will be joined by Paul Luke, an emerging market debt specialist currently at Deutsche Bank.

Martin Gilbert, Aberdeen's chief executive, said: "We are delighted with the transaction as part of our on-going programme of cost-cutting and disposing of non-core businesses. Although this is a relatively small transaction, involving only some £37m of assets under management, it eliminates an entire specialist fund range from our overheads." The sum of the transaction was not disclosed.

Aberdeen is left with one emerging markets debt fund, with assets of around £33m. It is based in Luxembourg and has made a return of 44 per cent since its launch in August 2002. Aberdeen also has a range of emerging markets equity funds. These are run by Hugh Young and are seen as one of last remaining jewels in Aberdeen's crown. It said there were no plans to sell the emerging markets equity division.

Aberdeen now has a much-reduced fund range after offloading a number of funds to raise capital and cut costs. It sold six of its retail unit trusts to New Star Asset Management last year, for £92.5m and is in the process of selling its property management division, which could be worth as much as £100m to Aberdeen.

Aberdeen is facing the prospect of forking out vast sums to investors in its doomed split-capital funds, which have been accused of being sold as low-risk funds when they were in fact highly geared to stock markets. The Financial Services Authority is still investigating a number of fund managers, including Aberdeen, who offered split capital investment trusts, for evidence of mis-selling and collusion between fund managers.

Aberdeen said the decision to sell the Guernsey funds was a meeting of minds between the company and Mr Adams. Removing its Guernsey portfolio cuts substantial regulatory costs. Aberdeen said its key objective is to run more mainstream funds but many financial advisers are unwilling to recommend Aberdeen while the split capital issue remains unresolved.