Aberdeen hit by emerging market outflows as AUM drops 13 per cent

AAM was the top faller in the FTSE 100 Index, with the shares sliding 4.6 per cent on the news to 319.4p, on the back of the news.

The group’s results in the year to 30 September show net outflows were £33.9bn which chairman Roger Cornick attributed to “weak investor sentiment towards Asia and emerging markets” as well as expected outflows from the group’s closed life books and withdrawals by sovereign wealth funds.

Net revenue for the year was £1,169m, 5 per cent higher than in 2014 while pre-tax underlying profit increased marginally from £490.3m to £491.6m. The final dividend was also boosted to 12p per share, up from 11.25p in 2014.

But the equities arm saw net outflows of £16.4bn, up from £13bn in 2014.

The group has been diversifying outside of emerging markets both organically and through acquisitions, such as SWIP which completed last year, with a greater focus on alternatives and multi asset propositions and chief executive Martin Gilbert remained stoic about the investment giant’s prospects yesterday despite admitting it faced a tough year ahead.

Mr Gilbert said the long-term fundamental attractions of investing in “these high-growth economies” remained compelling for patient investors.

Stock markets in the Asia-Pacific region had hit their nadir and would bounce back, he said, adding: “The cyclical correction in Asian and emerging markets and resulting negative investor sentiment has, as expected, led to further flows from our equities business.

“We continue to rebalance and diversify to focus on managing our costs and to generate cash and this has helped to mitigate the impact of the outflows. We intend to continue with this strategy alongside ensuring we continue to deliver long-term value for clients and shareholders.”

Results described by Mr Gilbert as “solid” included a rise in underlying pre-tax profits to £491.6million, from £490.3million a year earlier, during t he 12 months to September 30.

Net revenue was up by 5 per cent, to £1.17billion but assets under management fell to £283.7billion, from £324.4billion previously.

Mr Cornick added: “Asian and emerging markets are undergoing a cyclical correction. Traditionally these are areas of significant strength for Aberdeen, but we have experienced outflows from some investors who have made their asset allocation decisions on the basis of their macroeconomic views on these markets.

“Our strategy is based on our conviction that these markets will recover strongly over time and our priority is to ensure that our clients continue to be well positioned to reap the long-term benefits.

“However, for some time now, the board has recognised the impact that an emerging market correction could have on our business and performance, and we have been pursuing a deliberate strategy to mitigate against this risk.

Aberdeen has also been building a cash buffer to “weather market downturns and continue to invest in the business”, Mr Cornick said, with a cash position of £567.7m. With operating costs increasing 7 per cent to £670.3m at the end of September, the group has announced a programme to reduce annual operating costs by around £50m.