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What does Swip have to offer Aberdeen?
by Robert St George on Oct 25, 2013 at 08:13
Think of Aberdeen funds, and emerging market stars spring to mind. Think of Scottish Widows Investment Partnership (Swip) funds, and it’s underperforming UK equity giants.
So, viewed positively, there is at least little overlap between the two groups ahead of their prospective merger. But those of a more cynical disposition will question what Swip can add to Aberdeen.
Performance aside, the most obvious asset is a glut of UK equity money. Swip runs tens of billions in such growth, income and tracker funds, which have swelled thanks to its relationship with Lloyds.
These dwarf Aberdeen’s comparable funds. Its top player in the UK All Companies space is the £200 million Aberdeen UK Equity , which has returned 37% over the past three years to the FTSE All Share’s 33%. Swip’s best is its UK Enhanced Equity vehicle, which has eked out 30% over the same period. Despite this, it holds more than £1 billion.
Tucked away on this desk, though, is one of Swip’s best managers: the Citywire AA-rated Gregor Macdonald. His UK Smaller Companies fund has returned 76% in three years; Aberdeen UK Smaller Companies , more than double the size at £200 million, has posted 55%.
There are attractions beyond scale too, notably in fixed income and property. The Aberdeen Corporate Bond fund is a minuscule £30 million and has returned 15% since 2010. Swip Corporate Bond Plus is a £1.5 billion behemoth and, managed by Citywire + rated Mark Munro, it has produced 21% through the same time.
And Aberdeen has no competitor at all to the £2.3 billion Swip Property Trust , although it did reveal in September that it had received approval for a new property fund to which investors had made initial investment commitments of £130 million.
If property will be easy to integrate, then, headaches abound in the multi-manager arena. At more than £5 billion in total, Swip’s retail suite there is almost 10 times larger than Aberdeen’s equivalent range. Yet no individual fund on either side truly stands out as exceptional based on long term performance.
A broader question relates to how Aberdeen will integrate Swip’s recent emphasis on quantitative strategies within its own longstanding commitment to bottom-up stock picking. ‘We have a fundamental approach to investment, one we believe our clients appreciate,’ Aberdeen’s chief executive Martin Gilbert told investors last month.
In the same update, Gilbert expressed confidence in the long-term potential of emerging market equities and scepticism about the developed economies where Swip has more exposure.
‘While emerging markets have seen some cyclical adjustments in recent months, their structural growth potential remains unchallenged,’ Gilbert said. ‘We are also mindful that while there are signs of recovery in Europe and the US, the situation is fragile and structural problems have not been resolved.’
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- Aberdeen UK Equity A Inc
- SWIP UK Enhanced Equity A Acc
- SWIP UK Smaller Companies A Acc
- Aberdeen UK Smaller Companies A Acc
- Aberdeen Corporate Bond A Acc
- SWIP Corporate Bond Plus A Inc
- SWIP Property Trust Acc