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Aberdeen moves to stem GEM flows with 2% initial charge

Aberdeen moves to stem GEM flows with 2% initial charge

Aberdeen Asset Management will introduce a 2% initial charge on its popular emerging market funds in an attempt to stem flows and keep liquidity problems at bay.

The change in fee will apply to Aberdeen's £3.7 billion (£2.35 billion) Emerging Markets fund, its $15.5 billion Global Emerging Markets Equity and its $2.7 billion Global Emerging Markets Smaller Companies funds.

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.

Aberdeen boss Martin Gilbert (pictured) 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 closure. Last year he told investors such a move would be a 'last resort'.

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 the firm's bottom line.

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 decision has been taken to introduce a 2% initial charge on our Global Emerging Markets pooled funds in Europe and our US domiciled mutual and commingled funds will be closed.

'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.'

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.

'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,' he said.

'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.'

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