Aberdeen moves to stem flows into Kaloo’s GEM funds

Aberdeen Asset Management will introduce a 2% initial charge on its multi-billion dollar global emerging market funds as it aims stem flows and keep liquidity problems at bay.

The change in fee will apply to its Luxembourg-domiciled $15.5 billion Aberdeen Global Emerging Markets Equity and $2.7 billion Global Emerging Markets Smaller Companies funds - both run by star manager Devan Kaloo.

It will also affect the firm's UK-domiciled Aberdeen Emerging Markets  fund, also managed by Kaloo.

Announcing the change, Aberdeen said: 'Despite our most recent efforts to slow inflows into our emerging market products, we have seen inflows pick up again.

'The 2% charge will be paid into the fund for the benefit of all investors and not Aberdeen. The annual management charges in respect of these funds remain unchanged.'

Aberdeen boss Martin Gilbert has already talked of the need to curb flows into Devan Kaloo's emerging market fund, but wants to do everything he can to prevent a hard close. Last year he told investors such a move would be a 'last resort'. 

Against a backdrop of low interest rates, institutional and retail investor interest in emerging markets has remained strong, with further flows expected into the asset class.

The 2% initial charge will come into effect from 11 March for the Luxembourg domiciled Global Emerging Markets Equity fund and Global Emerging Markets Smaller Companies fund.

On 15 April it will be introduced for the UK domiciled Aberdeen investment funds ICVC, including the Aberdeen Emerging Markets fund.

Aberdeen said the difference in dates is due to regulatory requirements, and John Brett, the firm's head of distribution, added he was hopeful the change would have the desired effect. 

Aberdeen's latest move to limit flows into its emerging market funds differs to a soft close in that proceeds from the charge will be directed back into the vehicle, rather than towards benefiting the firm's bottom line.

'Further inflows, if unchecked, will give rise to liquidity issues which may in time result in the investment team being forced to compromise its investment process, resulting in the introduction of lesser quality companies,' said Brett.

'The team remains committed to its investment philosophy and will only introduce new stocks to the portfolio when they have been fully researched in accordance with Aberdeen’s group-wide equity process and the team is satisfied that they meet our quality standards. To do otherwise would not be in the best interests of investors in the funds.'