Vienna gave birth to the waltz, a gentler dance than the elbow-jabbing jig that Martin Gilbert has been dragged into by Opec meetings in the city. A depressed oil price has put sovereign wealth funds in a spin, and led them to withdraw capital from fund managers — leaving the boss of Aberdeen Asset Management to preside over a dispiriting drop in assets.
Oil has spiralled down in price by 42 per cent in a year, as Saudi Arabia has sought to squeeze out marginal US shale operations. This has left the country, which we should describe as “oil-long” rather than “oil-rich”, with a burgeoning deficit. Saudi sovereign funds, like others worldwide, have thus been draining their money from emerging market investment funds of the kind run by Aberdeen.
Aberdeen suffered net outflows of £34bn in the year to September — which represented the lion’s share of an overall £41bn fall in assets under management to £283bn. This Friday’s Viennese meeting of Opec is thought unlikely to foreshadow production cuts. That explains Mr Gilbert’s downbeat demeanour on Monday. He expects emerging market funds to go on shrinking, as long as oil remains depressed by maintained output and weakening Asian growth.
The gravel-voiced investment veteran has managed to keep underlying profits before tax pegging along at £490m by cutting costs, notably at the Scottish Widows Investment Products division that he bought for £650m in 2013. But sales there have been constrained by jitters over regulation.
Investors feel nervousness of their own about the dividend, which Aberdeen has increased 8.3 per cent this year. The group is left with net cash of £567m, but some £250m is required as regulatory capital, limiting scope for big new acquisitions. It could be “Goodnight Vienna” — as oldies term a wipeout — for progressive payouts unless oil prices recover.