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Aberdeen loses £4bn client and sees £3.3bn leave Swip

Aberdeen loses £4bn client and sees £3.3bn leave Swip

Aberdeen Asset Management saw a withdrawal of £4 billion from a single client and £3.3 billion worth of outflows from its recently acquired Scottish Widows Investment Partnership (Swip) business in the second quarter.

Aberdeen shares were under pressure in reaction, down 3.1% at 11am stand at 445.2p, although this represents a recovery from the intraday low of 439.3p hit shortly after the opening bell.

Shares now sit 11% below their 52-week high of 500p.

Aberdeen described the withdrawal from the client as ‘low margin’, saying it came from its Asia Pacific and global equities strategies.

Meanwhile net outflows from Swip stood at £3.3 billion. Aberdeen said the majority of this arose from 'anticipated' outflows from certain elements of the acquired business, together with seasonal outflows from low margin liquidity funds.

Aberdeen added it was ‘notable’ that Swip’s property capability attracted £0.2 billion of inflows in the quarter.

‘The majority of the outflows for the quarter have been from lower margin products, within both Aberdeen and Swip, and the effect on annual fee income is relatively small,’ Aberdeen said in a statement.

Excluding these events, Aberdeen said flows in the three months to the end of June were ‘more encouraging, with net outflows from global emerging market equities reducing to £0.2 billion, while Asia Pacific contributed £0.1 billion of inflows. Outflows in global equities stood at £0.3 billion.

Meanwhile its emerging market debt funds saw £0.7 billion come in.

Overall assets under management declined 0.6% to £322.5 billion.

Aberdeen said the integration of the Swip business was proceeding in accordance to expectations, both in timing and delivering cost synergies. It believes the front office integration will be largely complete by the end of  the year.

Chief executive Martin Gilbert (pictured) is optimistic about the firm’s prospects for the remainder of the year.

'Encouragingly, investor sentiment towards Asia and emerging markets recovered somewhat during the quarter. While the improvement in our underlying equity new business flows has been masked by a significant withdrawal by a single client, it is rewarding to see growing interest in our broader product range,’ Gilbert said.

He added:‘We completed the acquisition of Swip at the beginning of the quarter and we are pleased with the progress of the integration so far, in terms of both timing and the planned synergies.’

‘Our enlarged and strengthened business enables us to meet the needs of a broader range of clients given our diverse product mix and Aberdeen, as a result, is even better placed to deliver attractive returns to clients and shareholders alike.’

Broker reaction

JP Morgan Cazenove was not too concerned about the outflows as it repeated its overweight rating, while raising it price target on the stock from 509p to 520p.

While the combined outflows were greater than the brokers estimate of £4.2 billion, the broker drew comfort from the improving trends within equities and continued positive flows into emerging market debt, along with the fact that the Swip integration remained on track.  

Meanwhile RBC said the negative share price reaction was 'understandable'  and saw no reason to alter its outperform rating.

'We believe the share price reaction is warranted because of (1) lower AUM than we forecasted; and (2) a messy IMS, RBC analyst Peter Lenardos said.  

'However, flows are stabilising, investment performance is improving, and the revenue yield is holding up. We continue to see little impact on consensus forecasts as a result of today's statement.'

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