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Size Matters – Ask Martin Gilbert

Summary

Now that December is well underway, we can mention the ‘C’ word and we’ll take this opportunity to wish our clients, readers and followers a very happy New Year and a prosperous 2016 and what looks like another challenging year. In lieu of sending out Christmas cards, we are donating the cost of our usual Christmas card purchase to the When You Wish Upon a Star Charity this year (granting the wishes of children with a life threatening illness).

Now that December is well underway, we can mention the ‘C’ word and we’ll take this opportunity to wish our clients, readers and followers a very happy New Year and a prosperous 2016 and what looks like another challenging year.  In lieu of sending out Christmas cards, we are donating the cost of our usual Christmas card purchase to the When You Wish Upon a Star Charity this year (granting the wishes of children with a life threatening illness).
We cannot guarantee this will be the last blog of 2015 as we only write when there’s something different and hopefully worthwhile to comment on and that’s not determined by a calendar.  This will be the last of the Size Matters blog series for the year though and we were drawn to the Aberdeen Asset Management’s annual results released on Monday 30 November.  In case you missed it, these were the key points:-

  • Assets under management dropped £41 billion over to the year to £283.7 billion at the end of September 2015
  • Net new business outflows of £33.9 billion for the year
  • Ten consecutive quarters of net outflows
  • The quarter ending September 2015 saw £12.7 billion of outflows
  • Profits before tax fell by less than £1 million to £353.7 million
  • Aberdeen’s share price fell 4.5% on the news

Now Aberdeen is an example of a large asset manager with sizable exposure to ’emerging markets’.  Chief Executive, Martin Gilbert made the following comments:-
“August seemed like the height of outflows, then it slowed a bit but not enough to say that we are out of the woods yet. We have not yet reached the bottom but we are nearer than we were. It is tough at the moment, but the funds are still massive.”
The word ‘massive’ caught our eye. Was Martin assuring shareholders in Aberdeen that their size would continue to generate significant revenue for the business? Nonetheless the words used in the reporting of the results and Martin’s own language leaves you thinking that the interests of the shareholders might rank above those of the investors in Aberdeen’s funds.
While the need to invest in large funds is important for large investors like public pension funds, we don’t see why smaller investors should be drawn to the large investment houses unless performance is consistently good.  Of course there is the comfort of the name recognition but often as a fund investor you could rank behind the company shareholders in terms of relevance.
One of the noticeable omissions in the key points from Aberdeen’s results was mention of their investment performance. If I was an investor I would find that unnerving although I’m sure it’s mentioned elsewhere in the full report.
Surely it is better to find the provider of relevant investment solutions with consistently good returns meeting investors’ objectives that aren’t constrained by size and a focus on asset gathering.
By the way, Martin Gilbert bagged a £2.9 million bonus.

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