Emerging Markets Outflow Hits Aberdeen Asset Management

By Juliet Samuel 

        The flow of money out of emerging markets has hit a British asset manager seen as a bellwether for investments in the developing world.
        Aberdeen Asset Management, one of Europe's biggest investors in emerging markets, saw investors pull GBP19.5 billion ($30.4 billion) out of its funds in the second quarter of this year.
        That was partially offset by GBP9.6 billion in inflows to Aberdeen's funds. Tumbling markets and foreign exchange movements helped slash its total assets under management by 7% to GBP307.3 billion.
        Several other emerging markets focused funds groups including Ashmore Group and Franklin Templeton Inc. are due to report earnings in the coming weeks.
        Investors have been retreating from emerging markets over fears about the potential impact of the Federal Reserve raising interest rates soon, as well as the growth of the U.S. economy, both of which tend to make investments in the West relatively more attractive and drain money from other markets.
        Martin Gilbert, chief executive of Aberdeen, admitted the company is in "a difficult position" as the markets in which it is most heavily invested fall out of favor. It is suffering despite largely avoiding investments in mainland Chinese companies, which have experienced a dramatic boom and bust driven by government credit policy over the past few months.
        "We've got to sit this out. All we can do is control what we can control, which is [to] look at the costs in the business [and] try and manage money well for our clients," said Mr. Gilbert, although he added that is unlikely to include many job cuts. "What we can't do is manage market sentiment."
        The turbulence forced Aberdeen to cut its forecast for revenues and margins, sending its share price down 7.7% in the morning in London.
        Aberdeen bought Scottish Widows Investment Partnership last year in an effort to diversify its business, but SWIP hasn't yet benefited from the flow of money back into developed markets. SWIP serves traditional pension clients and is most heavily invested in European markets.
        Mr. Gilbert said that because there is little overlap between SWIP's client base and the sovereign-wealth fund and private bank investors who put money into Aberdeen's emerging markets business, the two haven't offset one another. Aberdeen has been launching more multiasset products aimed at pension funds in recent months.
        Mr. Gilbert also said the U.K. government's decision to revise the way it taxes banks is "welcome." Aberdeen is a major shareholder in HSBC PLC and Standard Chartered PLC, both of which have been disproportionately hit by a bank levy introduced in the U.K. after the financial crisis. Amid threats by HSBC that it could relocate its headquarters overseas to avoid the levy, the government recently said it would redesign the tax to focus on profits rather than balance sheets, lightening the burden for the emerging markets-focused banks.
        Write to Juliet Samuel at juliet.samuel@wsj.com
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        (END) Dow Jones Newswires

        July 23, 2015 08:44 ET (12:44 GMT)

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