Shunning Euro Crisis Boosts Funds for Aberdeen Stock Picker
Aberdeen Asset Management Plc (ADN)’s Jeremy Whitley says the best way to cope with the European debt crisis as a stock investor might be to overlook it.
The head of U.K. and European equities at Scotland’s largest money manager has turned around the performance of his funds by investing in companies such as Rolls-Royce Holdings Plc (RR/), the world’s second-largest aircraft-engine maker, and Schindler Holding AG (SCHP), the second-biggest maker of elevators.
“When you have a situation like the euro, it is very difficult to set your own thought processes to what might happen,” Whitley, 47, who is responsible for 4.3 billion pounds ($6.8 billion), said in an interview on May 21 in his office in Edinburgh, the Scottish capital. “It might go one of five, six or 10 ways outside our control and outside the control of the companies we are investing in.”
Markets have been roiled as Europe struggles to reduce sovereign debt in the wake of the global financial crisis. European Union political leaders met yesterday for the 18th time since Greece was overwhelmed by debt, with investors’ immediate concerns focused on Greece’s willingness to stick to its austerity program and the health of Spanish banks.
Whitley took over running the two funds in October 2009, the month elections brought in a new Greek government and the country started revealing the state of its finances.
“I would be amazed if anything is sorted out in the next two years,” he said. “It could take three to five years.”
The 157 million-pound Aberdeen U.K. Equity Fund (ABEUKAI) has since gained 23 percent, ranking 37 of 277 similar funds, according to research firm Morningstar Inc. The 238 million-euro ($304 million) Aberdeen Global European Equity Fund (ABEEMAA) has fallen 1.3 percent over the same period, ranking 22 of 101 funds.
During the previous two years, the U.K. fund ranked 202 of 258 funds, declining 20 percent, while the European fund ranked 72 of 88 funds, falling 15 percent, Morningstar said.
“We want the strongest growth we can find in companies that are operating on a global basis, that have a very strong business model offering goods and services to customers that absolutely need them,” Whitley said.
Whitley isn’t a frequent trader. The most recent U.K. stocks he bought were early in 2011 when he invested in Experian Plc (EXPN), the world’s largest credit-checking company, and Compass Group Plc (CPG), the largest catering company. Experian has risen 12 percent since the start of 2011, while Compass is up 7.9 percent over the same period.
This year, Whitley bought shares in Swedish Match AB (SWMA), Europe’s largest maker of smokeless tobacco products, and Assa Abloy AB (ASSAB), the world’s largest lock maker. Swedish Match has gained 9.3 percent in 2012, while Assa Abloy is up 7.4 percent.
The only stock he has sold this year is Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s second biggest lender. The sale came after Aberdeen realized that any potential bailout of BBVA’s Spanish operations would be even bigger than it had thought, Whitley said. BBVA, which hasn’t needed aid, has slumped 27 percent in 2012.
Last year, Whitley sold shares in Bayerische Motoren Werke AG (BMW), the world’s largest maker of luxury vehicles, and MAN SE (MAN), the German truckmaker controlled by Volkswagen AG. BMW rose 4.5 percent over the past year, while MAN has declined 20 percent.
He bought shares in Croda International Plc (CRDA), a U.K. specialty chemicals company that makes ingredients for products such as L’Oreal SA’s shampoos. He should have bought the stock three years ago rather than in 2011, though held back on concern about its pension fund. Croda’s shares have quadrupled in the past three years and gained 15 percent in the past 12 months.
“We’d rather make sure of something we’re worried about than not, even if it means we miss the shares going up for a bit,” he said. “Once we’d got over our concerns we still felt Croda offered an attractive long-term investment.”
Whitley, who was born into the then family-owned Greenall Whitley brewing empire, is a graduate in English and art history from the University of St Andrews. He has worked in fund management since 1988 when he joined SG Warburg, now part of UBS AG. He returned to Scotland in 1994 where he joined Edinburgh Fund Managers Plc, which was acquired by Aberdeen in 2003.
International investors are balking at European stocks at the moment, Whitley said.
Aberdeen clients pulled a net 139 million pounds from U.K. and European stocks in the six months ended March 31, according to a company presentation on its website. By contrast, the firm had net inflows of 4.4 billion pounds into emerging market, Asia-Pacific and global equities over the same period.
“You have this underlying growth assumption in Asia whereas in the West you haven’t got that,” Whitley said. “If we can find evidence of structural growth we will analyze and follow that very closely and find companies that will benefit from those favourable tailwinds.”
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