Aberdeen Asset Management suffers accelerating EM outflows

Investors withdrew billions of pounds from Aberdeen Asset Management as money continued to drain from Europe's largest independent investment group because of worries over emerging markets.

Net outflows for the six months to the end of March rose to £11.3bn, higher than market expectations and extending a miserable run dating back to the second quarter of 2013.

Aberdeen, which has a large chunk of its business in the emerging markets, has suffered outflows since the US Federal Reserve first raised the prospect of an end to quantitative easing in May 2013, which sparked the so-called taper tantrums in the emerging markets.

The worry for Aberdeen is that outflows are accelerating as the £11.3bn figure is higher than the same time last year, when net outflows stood at £8.8bn.

Martin Gilbert, chief executive, insisted he was not going to worry about short-term headwinds and maintained the business was on course for expansion.

"I am confident outflows will reverse once emerging markets come back into fashion. These are short-term headwinds, which we can weather. We have increased underlying profits and are heading in the right direction," he said.

The group posted underlying pre-tax profits of £270.2m, which was broadly in line with market expectations and higher than the £217m posted in the same period last year. This was helped by its acquisition of Scottish Widows Investment Partnership in late 2013.

Net revenue of £605.2m was broadly in line with expectations and higher than the £503.5m at the same time year. The group also increased its assets under management to £330.6bn compared with £324.5bn a year ago and £323.3bn at the end of December.

Mr Gilbert insists the acquisition of SWIP will help the group diversify and strengthen long-term performance as its reliance on its blockbuster products of global equities, emerging market equities and Asia Pacific equities decrease.

However, in recent weeks analysts have downgraded Aberdeen's stock, while some big hedge funds are shorting the group, as they expect outflows to continue.

Although some investors have moved back into emerging market assets in recent weeks, Aberdeen's outlook still looks uncertain over the coming months, with expected US interest rate rises likely to put more pressure on emerging markets, which even Mr Gilbert admits may lead to more outflows and lost business.

Aberdeen has also faced pressure from passive funds, which have become more popular with retail investors over the past two years.

Peter Lenardos, strategist at RBC Capital Markets who downgraded Aberdeen's stock in April, said: "The key thing in asset management is flows and I cannot see Aberdeen's flows improving, which is why I downgraded them. These results confirm my fears."

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