Aberdeen Sees Sovereign Assets Shrink $19 Billion in Two Years

Updated on
  • Net outflows totaling $13 billion reported in first quarter
  • Investors pull cash from Asia, global equities funds

Aberdeen Asset Management Plc has seen sovereign wealth-fund assets shrink by about 13 billion pounds ($19 billion) since a peak in 2013 as clients from oil-dependent countries cashed out and markets slumped.

Chief Executive Officer Martin Gilbert said SWF’s now represent about 2.5 percent, or 7 billion pounds, of Aberdeen’s total assets under management. That’s down from 10 percent two years ago. Aberdeen rose Wednesday after the company said outflows slowed in the first quarter and more cost cuts were announced.

“Sovereign wealth funds were set up for a rainy day and that rainy day has arrived,” Gilbert, 60, said on a conference call with analysts. “I expect to see further withdrawals. People are still taking risk off the table rather than putting risk back on.”

Aberdeen, which has about 25 percent of its assets invested in emerging markets, had 9.1 billion pounds of net outflows in three months through December, the Scottish firm said in a statement. Investors pulled about 6.3 billion pounds from a range of equity funds including 3.5 billion pounds from global stocks.

Gilbert, under pressure after more than two years of outflows, said in November that 2016 would be a difficult year for the asset-management industry if the oil price remained at $45 to $50 a barrel. Oil is currently trading at about $32 a barrel with some banks saying we haven’t yet seen a bottom in prices.

The CEO told journalists on a separate call that he was happy to stay at the helm of the asset manager as long as the board wanted him. He has previously ruled out a sale of Aberdeen, saying the downturn has made the company more determined to remain independent, even after more than 1 billion pounds was erased from the firm’s market value in 2015.

The shares closed up 3.1 percent to 240 pence in London, trimming the loss this year to about 17 percent. Gross outflows slowed to 20 billion pounds in the fiscal first quarter, compared with 22.2 billion pounds in the previous three months.

The firm has identified further cost savings beyond the 50 million pounds already flagged to investors, mainly in the middle and back offices, Gilbert said. He doesn’t expect to announce job cuts but said the firm would not replace staff.

Assets under management climbed in the quarter to 290.6 billion pounds from 283.7 billion pounds, boosted by acquisitions including Arden Asset Management LLC. The balance sheet remains “healthy,” with the firm holding more than 500 million pounds in excess cash, Gilbert said.

“We just have to wait until the markets recover,” he said. “It’s a tough market but we are doing what we can.”

Separately, Aberdeen announced that Chairman Roger Cornick plans to retire in September after seven years in the role. He will be succeeded by non-executive director Simon Troughton, who joined the board in 2009. Jim Pettigrew is also planning to step down from the board in April after joining in 2010.