Aberdeen Asset Management is benefiting from the shift in investor perception of emerging markets from dangerously “hot” to a more mainstream opportunity, writes Cherry Reynard.
Aberdeen’s fixed income expertise largely came through the DeAM acquisition in 2007. Gary Potter, a joint head of multi-manager at Thames River Capital, says that there are some strong managers within this business, but it has tended to be more institutional in its focus, with DeAM retaining its brand in the institutional market.
The group inherited a multi-manager business from Credit Suisse Asset Management. This side of the business has 12 funds, managed by the experienced team of Aidan Kearney and Graham Duce.
Short-term performance is relatively weak, with seven out of 12 funds fourth-quartile over one year. Longer-term performance is more robust. Many of the funds are relatively small, with most under £40m, and the fund range is broad, suggesting that consolidation may be a possibility in the future.
Aberdeen has a large property business, which has expanded into eastern Europe and other regions largely through acquisitions. However, it is its Property Share fund for which it is best known in the British retail market. Standing at present at £173m, the fund has suffered more than the wider sector and is fourth quartile over one and three years.
Recent product development has focused on emerging markets. Aberdeen is building its stable of emerging market equity income portfolios with a Latin American Income fund. It already has a popular Asian Income fund.
The group has launched a bond fund investing in Asia, aiming to capitalise on the demand for emerging market debt. Currie says that despite strong inflows into emerging market debt funds in 2010, the asset class is still relatively under-used by investors.
The group has also launched a European bond fund. It has recently focused its marketing efforts on its Aberdeen World Growth & Income Fund, which is a global equity income portfolio managed by the global equity team in Edinburgh. Lowcock says that the group has strength in global equities and he would be a supporter of the fund.
Potter at Thames River says that he has used the group in the past – usually for emerging markets – but has not invested with them for a while.
He says: “I have a lot of respect for the investment process that Hugh Young has put in place across the company. The stock selection process is very good and we like the focus on high-quality businesses.”
Potter suggests, however, that the group needs time properly to absorb all its acquisitions and would benefit from a period of organic growth. He says that the group’s investment message – which remains robust – has got lost in the flurry of corporate activity.
He notes that the group is shedding the split-cap problems, but needs a coherent message for the future.
He concludes: “[Aberdeen] remains a powerful force in investment management and it has a very strong team of people.”
For some investors Aberdeen will be forever associated with the split-cap problems, but for the latest generation of investors the firm is far more an emerging markets specialist.
In the past, the group has been too much associated with the “hot” area of investment, but it is difficult to think any longer of emerging markets as hot. For many investors they are increasingly a core part of asset allocation.
Emerging markets are becoming a more important part of Aberdeen’s business and it is making sure it has all bases covered on both the equity and bond side of the business.