- Aberdeen AM was founded as a trust in 1983, now it has over 430 bn in AUM
- China and India present opportunities in equities
- It is not a good time to exit emerging markets
Martin Gilbert, CEO of the Aberdeen AM, company he co-founded over 30 years ago, met with us in Palm Beach, after a brief "road show" in Miami with which Gilbert reaffirms one of his strongest commitments for 2016: the US offshore market. “The offshore industry in the United States is extremely important for Aberdeen. It is a sophisticated professional community which is highly geared towards the Latin American HNW client and shows a marked interest in international markets where the range of Aberdeen products stand out”
85% of Aberdeen AM’s clients are outside the United States, and 90% of the assets in which the firm invests are also outside the US market. Bev Hendry, who is co-director for the Americas region and accompanies Martin Gilbert in the interview, reiterated the international character of the management company and its commitment to clients such as "wholesale", brokers-dealers, family offices, and private banks, which from the United States handle the wealth of international clients, especially of those from Latin America, "we are very aware of the importance of Miami as a center for the management of offshore wealth originating in Latin America, and in 2016 we would like to reinforce our team in that city, and to eventually hold a conference in Miami in which our leading experts can present their best ideas." With this "Investors Day" Aberdeen AM would bring its renowned experts, including Andrew McCaffery, Global Head of Alternatives; Archie Struthers, Global Head of Investment Solutions; and Devan Kaloo, Head of Global Emerging Markets, to Miami.
Apart from the idea of holding a global conference for investors in Miami, Aberdeen AM's commitment to the city as the center for the offshore industry in the Americas also includes the idea of growing its sales team in Southern Florida, diversifying its headcount from the current New York office. Both Martin Gilbert and Bev Hendry stress the importance of Miami as the main hub for the region. Currently, Menno de Vreeze, Business Development Director for the International Wealth Management business in the Americas, and his team, consisting of Andrea Ajila, Damian Zamudio, and Paula Ojeda, are based in New York, from where they serve the entire region.
Creating a Giant: From US$75mn to 430bn in 30 years
Aberdeen AM was founded as a trust in 1983, around a fund which was created in 1876 to finance railways in the UK. Martin Gilbert explains modestly: "I was the assistant at the law firm which managed this trust, we repurchased the fund, and eventually, when the senior partners retired, I was responsible for the daily life of the firm." The first five partners to join the new management company were all from the same school in the Scottish city of Aberdeen. Bev Hendry, the business’ current co-Head in the Americas region, was part of this group, and joined the management in 1987. "We were a very small company; in 1985 we had US$75mn in assets under management "Gilbert explains.
Since its inception, Aberdeen AM has been a very active management company in acquisitions. Martin Gilbert points out some key moments in its history: "In 1988 we had the good fortune to acquire Sentinel Asset Management, where Hugh Young worked as Director of Equities and expert on Asian Equities. Possibly the most important strategic move in Aberdeen’s history was the decision in 1992 for Hugh to move to Singapore to co-found Aberdeen Asia and lay the foundation for our successful Asian franchise." Hugh Young is currently still a key player in Aberdeen AM’s Asian business, being responsible for its day-to-day operation and member of Aberdeen AM’s Executive Management Committee. Singapore currently has more than 150 employees, with 65 investment professionals spread across the Asian region, with offices in Australia, China, Hong Kong, Japan, Malaysia, Korea, Taiwan, and Thailand. Aberdeen’s Asian equity and fixed income funds have received numerous international awards for good performance, and although they have currently undergone significant repayments due to the difficult environment experienced by some emerging markets, they are still clearly leaders in this asset class.
Emerging Markets: Pros and Cons for the Management Company
Since the first quarter of 2013, emerging markets have presented an ongoing challenge for global investors. Because of Aberdeen AM’s leadership in this asset class, the impact has been important for the management company. In its annual results published in September 2015, it reported net outflows of 33.9 billion pounds in assets, mostly linked to equities and emerging markets, an amount just over 51 billion dollars at that date’s exchange rate.
"The deterioration in emerging markets has left some assets trading at very attractive levels," explains the asset management company’s CEO. "Brazilian bonds, for example, are yielding 6% in hard currency. The yields in local currency are even more attractive. There are many opportunities in equities; especially in China and India where our Asian equity experts see many opportunities. Brazil, on the other hand, has probably bottomed out in terms of currency," he says. "We remain a firm believer in the Asian region, particularly for investors whose local home currency is the US dollar."
The management company’s CEO believes that investors who had the good sense to exit emerging markets are now already planning to return to at least a neutral position. For investors who have maintained their position in these markets the advice is unequivocal: "Whatever you do, do not exit now, as it’s the time of maximum pain".
Gilbert points out that Aberdeen AM still maintains the same investment philosophy which led it to build a successful franchise in emerging markets: invest in solid companies with strong fundamentals and good corporate governance, and do so at a reasonable price.
Martin Gilbert is convinced that with this strategy money will return to emerging markets. In fact, referring to the results published for the year 2015, Gilbert points out that gross inflows of assets "have been excellent, although obviously, due to the situation in emerging markets and to oil prices, there have been significant redemptions," particularly from sovereign funds from countries in need of resources.
Diversify into Alternative Assets
In its recent acquisitions, Aberdeen AM has focused on completing its range of alternative assets. "Over the past few months, we bought asset management companies which allow us to fill certain gaps in our product offering." In August 2015, Aberdeen completed the acquisition of Flag, an asset management company which offers private equity solutions and real assets based in Stamford, with offices in Boston and Hong Kong. Arden, with offices in New York and London, is a hedge fund company which will complement Aberdeen AM’s range for this asset class. "Since the 2008 crisis, asset management companies have experienced a difficult environment, which opens opportunities to acquire good firms at good prices," says Gilbert.
For Aberdeen AM, these acquisitions are aligned with of one of its main objectives for the coming years: the development of a franchise of alternative solutions to diversify its range of assets.
For an asset management firm, retaining talent is a matter of utmost importance. Aberdeen AM compensates its key employees with the payment of a variable amount prorated over the five years following the time it is awarded -four years to the next level within the company-. In addition, investment professionals must invest part of that bonus in their own strategies, or in a list of related funds. Thus achieving the alignment of the client’s and the manager’s objectives.
"One of the keys to retaining talent in Aberdeen AM is our corporate culture," says Gilbert. "Top management is quite accessible." In addition, Aberdeen AM offers a graduate program, in which it yearly hosts some 100 trainees who temporarily work in the various offices of the company worldwide. "Each year, about 35 or 40 of those 100 become part of the program, and are trained in Aberdeen’s corporate culture from the start, promoting themselves internally within the company throughout their career."
Martin Gilbert co-founded Aberdeen Asset Management in 1983, before he turned 30. The asset management company has since then evolved through a combination of organic growth and acquisitions to become one of the world's largest independent asset management firms, with about US$430 billion in assets under management. This figure was considerably higher before the market cut-backs and the change in sentiment towards emerging markets, one of the asset classes in which Aberdeen AM has shown greater expertise.