Aberdeen Asset Management has seen tentative signs of recovery but remains cautious about its core business in emerging markets this year.
The embattled money manager posted a net increase into its emerging markets-focused equity funds for the first time in three years, but its total outflows remained stubbornly high at £17 billion, and it warned that more could follow in the coming quarters.
Shares in Aberdeen, which have rallied in the past few weeks, slumped by almost 10 per cent today as pre-tax profits nearly halved to £99 million in the six months to March 21 compared with a year ago. Total assets under management were £293 billion, down from £331 billion a year ago. The picture improved from the end of Aberdeen’s financial year, when assets stood at £284 billion.
Martin Gilbert, 60, the chief executive, said that conditions were “a bit better than they were” and noted that other fund managers were beginning to struggle with global challenges to markets. “There is a lot of pain coming into the market now,” he said. “We’ve been in this for three years. I’d like to see some of the others to join us.”
Mr Gilbert said that the board was committed to paying out a progressive dividend, although it was dependent on the outlook. The company will pay an unchanged interim dividend of 7.5p a share. The shares lost 22p — or 7 per cent — to close at 270½p.
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The picture among other fund managers has been mixed. Ashmore, another specialist in emerging markets, suffered a quarterly outflow of $1.1 billion. In contrast, Henderson and Schroders have revealed inflows of clients’ money in the most recent quarter.
Aberdeen and others have benefited from a recent rally in emerging markets, but the European Central Bank put a dampener on hopes for further recovery yesterday, warning that structural problems such as weak investment and infrastructure could make it difficult for emerging economies to return to healthy growth.
Aberdeen has pledged to cut annual costs by £70 million by next year by technological advances and natural attrition of staff and has sought to diversify its asset exposure through small acquisitions. In the previous six months Aberdeen completed takeovers of Arden, the hedge-fund manager, Parmenion, the risk-graded portfolio provider, and Advance, the fund-of-funds investment manager.
Liberum analysts said that Aberdeen was showing signs of a tentative recovery despite continuing woes. “After three and a half years of net outflows, totalling £73.5 billion, the management team is understandably cautious. But there are some signs of hope. The second consecutive quarter of slowing net outflows, the improvement in performance and the recent strengthening of the management team give cause for optimism,” the analysts said.
Paul McGinnis, of Shore Capital, warned about prospects, writing: “We think the sharp rise in the Aberdeen share price on the back of a recent emerging markets rally has not only gone too far but also risks masking the weaker fundamental issues surrounding fund redemptions and investment performance.”
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Roger Cornick, the Aberdeen chairman, said: “It is encouraging to note that our equity portfolios have performed strongly against their respective benchmarks during the first four months of 2016. However, this does not mean a dramatic improvement in new business flows is anticipated in the short term, as we recognise that many potential investors may need more evidence that this rotation is firmly established before investing.”
