Disastrous Year for Aberdeen Asset Management or How not to fight the liquidity risk?

The environment has not been kind to the Scottish Widows’ fund business, and to its parent company Aberdeen Asset Management. The past year has seen both companies suffer some of the heaviest outflows out of all fund providers in the Europe. Scottish Widows has become the continent’s most unpopular fund company during 2013, after investors took out more than 6.8 billion euros from its funds. These figures come from Morningstar, and have shown a dramatic and irreparable decline in its business. 

Aberdeen Asset Management took over the company last November in a 550 million pound deal. Their acquisition of the Scottish Window Investment Partnership was announced to the stock exchange, but did little to improve the outlook for either company. Aberdeen Asset Management also endured a disastrous 2013, losing about 1.6 billion euros in outflows. For the Aberdeen group, this is the first time in five years that they are among the bottom ten fund providers in Europe. The massive outflow they suffered through in 2013 was due to a policy to add 2% of initial charges to all of their funds. This was done to avoid liquidity problems, but it scared off investors who were worried about the fund’s profitability.

The Aberdeen group released a statement where they mentioned the fact that investors had decided to take their money elsewhere. However, they pointed to a general downward trend in emerging market fund flows, and hoped that the losses would only be temporary. Meanwhile, analysts at Barclays’ Investment Bank concluded that they had an overweight position on Aberdeen. Their reasons for this position referred to the revenue margins, growth from the acquisition of Scottish Windows and their potential capital gains. That report may put a positive spin on the situation at Aberdeen, but it is clear that the fund needs to find a new direction before they run out of business completely. Do you remember Gartmore?

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