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Banks, Financial

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Categorized | Financial

Aberdeen hit by further outflows as global uncertainty rises

Posted on November 28, 2016

Investors have withdrawn money from Aberdeen Asset Management for the 14th quarter in a row, compounding a year of pain for Europe’s third-largest listed investment house.

The Scottish asset manager, which specialises in emerging markets and Asian funds, said that it had suffered from economic and political events, and warned that the industry would face pressure on fees and from regulators in the year ahead.

Despite a rally in emerging markets it has been a difficult year for Aberdeen, which fell out of the FTSE 100 in March and was asked by UK regulators in September to raise its capital buffers.

After Britain’s vote to leave the EU, the group was forced to suspend redemptions from its property fund and lost a £1.3bn mandate from wealth manager St James’s Place.

In full-year results released on Monday, Aberdeen said it had suffered net outflows of £7.2bn in the three months to the end of September, pushing net redemptions for the year to £32.8bn. Profits before tax fell by almost a third to £352.7m compared with the previous year.

Shares rose 2.5 per cent at the open in London to 293p, but have fallen around one 10th over the past year.

Chief executive Martin Gilbert said that “strict cost management” had boosted the company but that volatility had dented flows.

“Economic and political newsflow has weighed on investor sentiment and, as expected, has led to further outflows from our business,” he said. “Structural themes, including fee pressure, technological innovation and greater regulatory requirements are a focus for all asset managers.”

The fourth quarter redemptions followed outflows of £8.9bn in the previous quarter. Net revenues for the year fell 13.8 per cent to £1.2bn.

Aberdeen’s total assets under management have grown 10 per cent over the past year to £312.1bn, due in part to a weaker pound. It said it would maintain a final dividend of 12p per share.

“A year ago we warned that Aberdeen would face a tough year and it has done so, but it has faced those difficult conditions with considerable resilience,” said Rae Maile, analyst at Cenkos Securities. “Importantly, shareholders have seen a maintained dividend.”

However, he added that “much depends” on market movements to come.

Emerging markets have experienced pressure in the wake of Donald Trump’s election as US president, which has raised the likelihood of an increase in US interest rates that could make emerging market debt less attractive. More than a third of Aberdeen’s equity assets are invested in the developing world.

Simon Troughton, Aberdeen’s new chairman, said that there could be pain to come. “Future political and economic events, including the UK’s negotiations to exit the EU, the start of President-elect Trump’s term in office and European elections, will contribute to ongoing volatility in global markets in the short term.

“Until there is greater clarity, it is difficult to predict the impact on markets over the medium and longer term.”