U.K. Asset Managers Brace for Redemptions After Brexit Voteby
Schroders tumbles as much as 28 percent, most since 1991
Buxton says brace for selling as funds aim to meet outflows
Schroders Plc and Aberdeen Asset Management Plc led a selloff in British asset managers as industry experts warned that the U.K.’s vote to leave the European Union could lead to a surge in redemptions.
There “will be liquidity concerns for funds, especially if there is a run of outflows,” Mark Pugh, who leads the U.K. asset-management unit at PricewaterhouseCoopers, said in an e-mail on Friday. Firms “will be worried about the combined impact of volatility on their own share price alongside the impact on the value of the assets in their funds.”
Schroders, Europe’s largest publicly traded asset manager, lost as much as 28 percent in London, the most since at least 1991, after British voters backed leaving the EU by 52 percent to 48 percent. Aberdeen Chief Executive Officer Martin Gilbert, whose firm tumbled as much as 32 percent, said it was “important to keep a calm head” for clients. Standard Life Plc, which was down 15 percent, said they had the “required measures in place” to continue to support customers and clients.
Investors pulled money in the lead up to the referendum, the result of which has caused the pound to plunge to the lowest level since 1985 and Prime Minister Cameron to resign. A net $1.1 billion was pulled from U.K. equity funds last week, the second-largest outflow ever, while European funds have been hit with 19 straight weeks of redemptions, according to a Bank of America Merrill Lynch research report citing EPFR Global Data.
“Investors should now brace themselves for an unpleasant period of relatively indiscriminate selling as funds aim to meet redemptions in conditions where liquidity may be more limited than usual,” Richard Buxton, Old Mutual Global Investors Chief Executive Officer said in a statement. “The prospects for domestically focused U.K. businesses are clearly the bleakest of all.”
The industry has been concerned about the need for liquidity in funds since last year. Aberdeen joined U.S. companies including BlackRock Inc. in setting aside additional money then to meet requests from clients to pull their funds in the event of drying up liquidity. That was amid fears of a bond-market selloff at the time.
Schroders and Aberdeen were both down about 12 percent by 10:16 a.m. Henderson Group Plc slumped 18 percent in London trading. Shares in British insurers that operate asset managers also declined. Prudential Plc, which owns M&G Investments, was down 11 percent and Legal & General Group Plc was off 17 percent.
“Asset managers will face mark-to-market impacts in the first instance, but it is potential impacts on gross sales that are a bigger concern,” Phil Dobbin, an analyst at Jefferies LLC, wrote in a note to clients. “The more equity exposure and the more operationally geared you are, the more your earnings are impacted, with follow-through into share prices.”