UPDATED: Gilbert hails performance recovery at Aberdeen

Aberdeen CEO Martin Gilbert

Aberdeen CEO Martin Gilbert

The UK-listed fund manager suffered an £8.9 billion net outflow in the three months to June 30, it said in a trading update this morning, July 25. But analysts welcomed an apparent slowdown in clients pulling money from its equity funds, which are Aberdeen’s highest-margin business.

Gilbert said: “We have had a huge improvement in equity performance this year. Year-to-date, our international equity fund is 9% ahead of benchmark. Our global-equities is 7% ahead. In UK equities we are 4% ahead and in emerging markets, it’s 7%.

“It is a huge improvement on performance in the three years preceding this, which is why we have been seeing these net outflows – together with negative sentiment in emerging markets.”

Aberdeen has had a cumulative £87 billion withdrawn from its funds in 13 straight quarters of net outflows. The last time the firm recorded a positive quarter was in the first three months of 2013.

Gilbert argued QE-pumped markets have not suited Aberdeen’s ‘value’ style of investing: “You have basically only needed to own five stocks, Apple, Google, Facebook and the rest. Pure value managers such as ourselves, especially with a tilt to emerging markets, have been carried out.

“We have had three horrible years, but performance has returned strongly. So theoretically, inflows should return at some stage. There is always a lag. I wouldn’t expect to see that until next year.”

Rae Maile, an analyst at Cenkos Securities, wrote in a note on July 25: “Net outflows from equities peaked in the fourth quarter of 2015 and have reduced each quarter subsequently. While far too early to call a return to inflows this is an encouraging trend we believe.” Maile has a “hold” rating on the stock.

Aberdeen’s overall assets under management ticked over the £300 billion mark during the three months, to £301.4 billion from £292.8 billion at the end of the first quarter.

This was mostly due to market appreciation and a positive foreign exchange effect arising from the UK’s vote to leave the European Union; the fall in sterling has boosted the relative value of Aberdeen’s dollar-denominated funds.

In this morning’s statement, Aberdeen said it is “well-positioned operationally” and “well placed” to take advantage of any market weakness following the UK’s vote to leave the European Union.

Gilbert said the only thing the funds industry “really needs” is an agreement on passporting fund services to and from London and the EU, so that Luxembourg-based mutual funds can continue to be managed from the UK capital.

Aberdeen’s property funds have also been caught up in the fallout from Brexit; a wave of investor redemptions followed the referendum result and forced a raft of similar listed funds run by fellow asset managers to suspend trading. Aberdeen suspended trading of its fund on July 5 before reopening it on July 13.

The asset manager reported outflows of £1.5 billion from its property assets this morning; though Maile, at Cenkos, wrote that “this largely reflected the company’s business in the Nordics as opposed to the recent issues in the UK, we believe.”

The firm said in the trading update that sterling’s weakness since the Brexit vote, together with “resilient” markets and and good investment performance “contributed to the increased value of our assets under management”.

• For comprehensive Brexit coverage, visit FN’s Brexit pop-up site

The firm also said it had launched the Aberdeen-Global Multi-Asset Growth Fund in Luxembourg, mirroring its flagship diversified growth fund in the UK. Aberdeen added it had experienced a large outflow in alternatives during the quarter “due to a change in strategy by an institutional investor”. The firm reported £1.2 billion in net outflows from its alternatives business over the three months to June 30, with assets on that date standing at £21.5 billion.

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