It’s been a year of two halves for Aberdeen Asset Management. The solid growth it’s become accustomed to fell through over the summer after it emerged the Chinese economy was involved in some sort of landing - hard or otherwise. So, while underlying pre-tax profit at the asset manager was technically up a touch to £491.6m (from £490.3m) for the full year, it actually fell 19% during its second half to September 30.
Aberdeen is heavily exposed to Asia and emerging markets, which have suffered from a collapse in Chinese demand for commodities. Investors looking to reduce their own exposure seem to be looking elsewhere. At the same time, oil producing nations are feeling the pinch from $45 crude and are pulling funds from their vast international investment portfolios to plug the gap.
Net outflows were nearly £13bn over the last quarter alone, leaving Aberdeen's assets under management down 13.5% for the year at £283.7bn.
None of this is exactly a surprise. Aberdeen built its success in regions where returns were higher, but that always came at a cost of higher risk. It was happy enough during the emerging markets upturn; perhaps now it’s the turn of bond and blue chip investors to look all smug.
Or perhaps not. Aside from the fact that the Chinese economy has not in fact collapsed (growth is somewhere between 3% and 7%, depending on who you ask), the company also took steps over the last couple of years to hedge against a slowdown, buying Scottish Widows Investment Partnership (or the rather less catchy SWIP) to diversify away from Asia and strengthening cash generation to boost its balance sheet.
While that quietly pays off and cushions the impact of the Chinese downswing, boss Martin Gilbert is busy trying to reassure investors to have a little faith. ‘While we believe the current weakness may have some way to run, the long term fundamental attractions of investing in these high growth economies remain compelling for patient investors,’ Gilbert said. Speculation of his impending retirement meanwhile remains just that.
Unfortunately, investors weren’t assuaged. Aberdeen’s shares fell 4.4% this morning to 320.2p, having lost nearly 37% of their value since April.