Edward Evans is a managing editor with Bloomberg Gadfly. He is former managing editor for European finance at Bloomberg News.

As the market turmoil that started in China washes up in Scotland's granite city, 2016 is shaping up to be a crunch year for Aberdeen Asset Management.

Shares Hit
Aberdeen shares are trailing their peers amid the emerging markets turmoil

Aberdeen spelled out in gory detail on Monday how its Asian and emerging markets-focused funds are hemorrhaging cash. Net outflows accelerated to almost 13 billion pounds ($19.5 billion) in the three months through September, bringing the total for the fiscal year to almost 34 billion pounds. Aberdeen said the industry is experiencing "the worst quarter for outflows from this asset class since the global financial crisis.''

Even worse, the company said the weakness still has some way to run, helping send the shares down almost 4 percent, and prompting analysts to cut earnings estimates for 2016.

Aberdeen's shares have already been pummeled, falling 25 percent this year, a steeper decline than Ashmore Group, an emerging-market focused fund manager, which is down 9 percent. By contrast, Schroders is up almost 11 percent. Aberdeen now trades at about 1.5 percent of assets under management, a discount to both Schroders and Ashmore.

The problem for Aberdeen isn't that it's failing to attract new money -- gross inflows rose to 42 billion pounds from 35 billion pounds -- but existing clients are heading for the exits at an even faster rate. They pulled out 76 billion pounds compared with 55 billion pounds in the year earlier. And outflows have been worst from its higher-margin equities products.

Outflows Dwarf Inflows
Clients are pulling money from Aberdeen's funds

CEO Martin Gilbert says, rightly, that there's nothing you can do about markets. He's focused on costs, hoarding cash and making acquisitions to diversify. Yet operating costs rose 7 percent this year (in part because of its purchase of Scottish Widows Investment Partnership) and even though core operating cash flow was 532 million pounds, it was still down on the previous year.

It seems brave in the circumstances for Aberdeen to reiterate its desire to be a dividend growth stock. The company says it can afford it. That assumes the weakness in emerging markets won't get worse or spread and that it can continue to make acquisitions. The problem is that Aberdeen hasn't cut its dividend since at least 2005 and its managers may be unwilling to concede its growth spurt is over.

That may account for why Gilbert proved equally reluctant to entertain takeover offers for the company this year. It's difficult to imagine the 60-year-old wanting to release his grip on a business he helped build from scratch. But if there isn't a revival in emerging markets in 2016, his shareholders may have other ideas.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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