“There is a glimmer of hope this year, but no more,” says Martin Gilbert, chief executive of Aberdeen Asset Management. The founder and leader of the group is under no illusions that the past three years have not been a torrid time for the asset manager, but he is keeping positive.
The list of Aberdeen’s bad news stories has been coming thick and fast. A change in investment sentiment and poor performance in emerging markets hit the emerging markets specialist manager, sparking outflows and poor performance across many of its funds.
The £290.5bn asset manager saw £9.1bn of outflows in the last three months of 2015, although this was a drop from the £12.7bn outflows the previous quarter. The asset manager also closed the largest number of funds last year than any other asset manager. It shut 28 funds, in part due to its acquisition of Scottish Widows Investment Partnership, with 20 of those merged into existing funds.
Most recently, Aberdeen has been kicked out of the FTSE 100, falling to the FTSE 250 as its market cap dropped, and has been knocked off the top 10 list of most popular fund management brands in Europe, based on the opinions of 1,000 fund selectors.
“It’s been a tough three years as emerging markets and value investing have been out of fashion. There is a glimmer of hope this year, but no more. The key is just to keep the faith, keep the style, don’t cut at the point of maximum pain and don’t try to trade your way out of the situation. Just wait until markets come back our way,” says Gilbert.
When we speak Gilbert is in the midst of a hectic travel schedule, taking him from Sydney to Tokyo, Shanghai and Beijing, and ending up in Singapore. “Coming out to Asia you wonder why everyone is worried, everything is booming out here,” he says. “You just need to come out to Asia and China to feel the energy. It’s obviously growing and I think the key to investing in emerging markets is turning that growth into finding the companies to invest in, and that’s what we spend our time doing.”
Some of the ways the firm is doing that is by being overweight India, avoiding state-owned enterprises in China and being overweight Hong Kong, he says.
We speak in the days after Aberdeen was kicked out of the FTSE 100, for the first time since it joined in 2012. However, on the news of the announcement the asset manager’s share price rallied, rather than falling as would be expected. “If the review had been done a day later we would have stayed in. The share price rose 10 per cent since we got kicked out. It’s really odd. I think I gave up at that point, I thought I knew how stockmarkets reacted after all these years,” he says.
The move out of the FTSE 100 does not mean much for the business and its clients, he adds. “It’s disappointing but these things happen, we just have to work hard to get back in.”
The asset manager has not been shy of acquisitions in recent years. It completed on the big acquisition of Swip in 2014 and since then has also acquired alternatives firms FLAG Capital Management, Advance Emerging Capital and Arden Asset Management. It also bought out SVG Capital’s stake in the joint venture vehicle Aberdeen SVG Private Equity Managers.
Many have seen this as an attempt by the asset manager to diversify its business away from emerging markets, but Gilbert says this is not the case.
“I’d rather portray it as we wanted to build our fixed income, property, multi-asset and alternatives business, and that is going pretty well but there is still a lot of work to do. We are getting there,” he says.
Other rumours about the firm’s future plans have included it getting into the ETF industry, but Gilbert says those rumours are all false. “It’s a highly competitive area, but no-one can make money from it,” he says.
He doesn’t rule out a move into smart beta, and already has some products in the space. “We’d love to expand it if people gave us more money.”
Another rumour about the future of the firm that Gilbert is quick to dispel is the story about him hunting around for a buyer for the asset manager. “That was such complete rubbish. We have made it absolutely clear that was just complete rubbish. In 33 years since we founded the business we have never looked for someone to buy it,” he says.
As for the few bright spots at the asset manager, Gilbert says the European high-yield fund is doing well, particularly as it does not have exposure to US energy companies. The UK property fund is “still doing really well”, as is the diversified growth fund, he says.
He is also confident that when investors start to come back to the emerging markets space, they will look to Aberdeen. “We are one of the biggest, clearly when people want to come back in they want to come back into big liquid funds,” he says.
While markets have yo-yoed, one stable factor Aberdeen prides itself on is its employee base, with the senior management team of Gilbert, deputy chief executive Andrew Laing, finance director Bill Rattray and head of investments Hugh Young having worked together since the 1980s. This means that the departure of CIO Anne Richards to become chief executive of M&G Investments earlier this year was bound to be a blow for the manager, and for Gilbert personally.
He does not deny this, but tries to spin a positive, saying it reflects well on Aberdeen that Richards was hired for a such a high-profile role. “When she told me I said there is no point even trying to persuade you to stay, it is such a big step upwards,” he says.
Aberdeen has used the departure to take another look at its investment structure. Hugh Young has taken the role of head of investment across all asset classes as a result, and has taken on the bulk of Richards’ role in addition to his own.
“I get paid to worry and I worry about everything, including my own job security”
However, Gilbert admits that there were things that Richards did that can’t be replaced, such as the work she carried out on diversity at the asset manager. It’s an interesting issue, as men make up a striking 86 per cent of the firm’s group management board and a 14-strong board of directors has just two women among them, both of which are non-executive directors.
Gilbert says taking a global view across the business, it is very diverse: “I was with the chairman in Singapore the other day and he said if anyone questions our diversity they should come to the Singapore office, there are so many nationalities working at Aberdeen,” he says. “But we will miss Anne’s focus on the 30% Club and all of that.”
As for Gilbert’s own future at the asset manager, the usually upbeat manager sounds hesitant, saying he hopes he will be there for some time to come. “You never know in this business, I might be marched out of the office one day. I’m not complacent, I get paid to worry and I worry about everything, including my own job security,” he says. “I’ll keep doing it as long as the board want me to. Hopefully it will, I’ve got a few more years in me.”