Aberdeen Asset Management Plc (LSE:ADN)

Martin Gilbert
CEO
Market Cap (AUD): Coming Soon
Sector: Financials
Last Trade (AUD): 0 +0 (+%)
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1. About

Aberdeen Asset Management PLC is a global investment management group, managing assets for both institutional and retail clients. The Company invests across the four main asset classes of equity, fixed income, property and alternative investment strategies. It operates in 23 countries and its key clients include national and corporate pension funds, central banks and other investment institutions.[1]

2. Business model

The Company operates the following divisions:  

 

Division

Revenue

($M)

% of Revenue

% of Profit (before Tax)

Sales and distribution model

Profit drivers

UK   

$514.30  

46.02%

100.00%

Through institutions and investment intermediaries

Financial markets have remained volatile and risk aversion to emerging markets led to AuM outflows

Revenue and underlying profit are higher than last year and Company achieved a healthy operating margin of 43.9%

Europe

$139.40

12.47%

Singapore

$245.10  

21.93%

Rest of Asia

$115.20  

10.31%

U.S.A

$103.60

9.27%

[2]

3. Strategy

Key strategies include:

 

– Focus on providing the highest levels of investment performance and client service

   Investment:

  • Maintain and further develop its four established investment asset classes
  • Deliver consistent long term performance across these competencies

   Distribution and client relationship:

  • Provide the highest levels of client service and client management

 

– Recruit, develop and retain talent

  • Team based approach  
  • Well resourced at all levels        
  • Robust succession plans in place

 

–  Seek cost effective growth and efficient organisational structure 

  • Expand and deepen distribution footprint
  • Company focus on distribution capabilities where our strengths match market demand   
  • Further develop its capabilities where we have a competitive advantage
  • Selective acquisitions at appropriate times in the business cycle
  • Develop and maintain a comprehensive global operating model to support all services and locations

 

– Maintain strong balance sheet through consistent cash generation

  • Maintain a progressive dividend policy[3]

4. Markets

Industry  (UK)

Industry

Revenue (2015)

Annual Growth

Fund Management Activities

£19 billion

7.8% Annual (11-16)

Property Unit Trusts

£502 million

1.6% Annual (10-15)

[4]

5. Competition

Major competitors include:

 

  • Ashmore Group plc (LSE:ASHM)
  • Investec plc  (LSE:INVP)
  • Schroders plc (LSE:SDRC)[5]

     

6. History

1983 – Aberdeen Asset Management began when a group of investors, including their current Chief Executive Martin Gilbert, bought out a £50 million investment trust in Aberdeen.

 

1991 – Aberdeen were listed on the London Stock Exchange under the name Aberdeen Trust PLC. They changed their name to Aberdeen Asset Management in 1997. Throughout the 1990s the Company grew rapidly, taking on assets in Asia and Europe and setting up offices in Singapore and Hong Kong.

 

1997 – Aberdeen acquired Prolific Financial Management from Scottish Provident, which made the Company a UK top-10 unit trust manager.

 

2000 – Aberdeen branched out into direct property, forming Aberdeen Property Investors through their acquisition of Barclays Property investment (UK) and Celexa.

 

2000 – Aberdeen purchased Murray Johnstone (UK), an international equities and bonds managers, and Equitilink, an Australian manager of domestic assets and US closed-end funds.

 

2003 – This year saw a major sale of UK retail unit trusts to New Star, bringing the Company £87.5 million. This, among other acquisitions, helped them to acquire Edinburgh Fund Managers.

 

2005 – Aberdeen acquired the UK and US institutional businesses of Deutsche Asset Management.

 

2007 – Aberdeen also moved into the Australian market with additional purchases from Deutsche Asset Management, and increased their US Assets with fund management businesses from Nationwide Financial Services. A major acquisition in 2007 was DEGI Deutsche Gesellschaft für Immobilienfonds mbH, which manages around £4.6 billion of assets in property funds.

 

2008 – The Company strengthened its position in the UK, acquiring Goodman Property Investors, and announced our business alliance with Mitsubishi UFJ Trust and Banking Corporations, Japan.

 

2009 – The Company completed their acquisition of asset management company Credit Suisse, which they had begun in 2008.

 

2010 – Closer to home, the Company acquired assets and contracts from RBS Asset Management and RBS Asset Management Holdings.

 

2012 – Aberdeen Asset Management PLC joined the FTSE 100 for the first time.

 

2013 – Aberdeen launched their first ever global brand advertising campaign. The group acquired 50.1% stake in SVG Advisers, acquired Artio Global Investors Inc in the U.S. in May and announced the planned strategic acquisition of Scottish Widows Investment Partners in November.

 

2014 – Aberdeen announced the completion of the acquisition of Scottish Widows Investment Partnership.[6]

7. Team

Board of Directors


Roger Cornick – Chairman
Martin Gilbert – Chief Executive
Simon Troughton – Senior Independent Non-Executive Director
Julie Chakraverty – Independent Non-Executive Director
Rod MacRae – Group Head of Risk
Andrew Laing – Deputy Chief Executive
Richard Mully – Independent Non-Executive Director
Jim Pettigrew – Independent Non-Executive Director
Anne Richards – Chief Investment Officer
Bill Rattray – Finance Director
Jutta af Rosenborg – Independent Non-Executive Director
Akira Suzuki – Non-Executive Director
Hugh Young – Global Head of Equities


Management


John Brett – Global Head of Distribution
Bev Hendry – Co-Head of Americas and Chief Financial Officer
Mandy Pike – Global Head of Dealing
Gordon Brough – General Counsel & Deputy Group Head of Risk
Gary Marshall – Chief Executive, SWIP
Andrew Smith – Co-Head of Americas and Chief Operating Officer
Kerry Christie – Global Head of Human Resources
Andrew McCaffery – Global Head of Alternatives
Archie Struthers – Global Head of Investment Solutions
Brad Crombie – Global Head of Fixed Income
Ken Fry – Chief Operating Officer
Sean Phayre – Global Head of Quantitative Investments
Pertti Vanhanen – Global Head of Property[7]


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8. Financials

Financial Year 2014 (ended 30 September):

 

Division

Revenue

($M)

% Change

Profit (before Tax) ($M)

% Change

UK

$514.30

19.63%

N/A

N/A

Europe

$139.40

(13.09%)

N/A

N/A

Singapore

$245.10

(14.12%)

N/A

N/A

Rest of Asia

      $115.20  

7.26%

N/A

N/A

U.S.A

$103.60

8.60%

N/A

N/A

Total

$1,117.60

3.63%

$354.60

(9.15%)

[8]

9. Risk

Major risks include:

 

Investment process

Risk of adverse movements in AuM due to markets and investment decisions. The Group’s revenue is mainly earned from management fees, calculated on the basis of the value of AuM. This will be affected by general market movements, as well as investor appetite and actual investment performance achieved by the fund managers. Equities remains our largest asset class. Future revenues may be sensitive to stock market fluctuations and changes in investor risk appetite to equities.

 

Investment mandate

Risk of breach of an investment mandate terms leading to action for compensation. This could arise from mis-management of an investment mandate.

 

SWIP integration

The scale and range of products managed by SWIP, the migration of data and integration of investment and other teams is a major project. There are risks over managing the project plan, achieving milestones on plan, migration of fund customer and holdings data across platforms, continuity of IT support and maintaining the consistency and quality of the investment process.

 

Loss of key investment personnel

The Company’s reputation and client retention could be damaged through significant changes in investment personnel.

 

Distribution and product

Client management

Client relationships are fundamental to its business and retention of AuM. The Company sources business through two channels of distribution: directly from institutions, or through investment intermediaries.This incorporates the risk that it misleads or misrepresents products to clients – this could create regulatory censure as well as loss of clients – or poorly manage client or distributor relationships.

 

Product

Risk of poor product design or that delivery of the final product was not what was intended. It can arise from creating new products, or risk that existing products no longer meet investor requirements

 

Client service and administration

Business continuity

The Company has an obligation to ensure that the business can operate at all times.

External service providers

The Group relies on a number of third party relationships and services to carry out business functions. The risk arises from the inability to effectively carry out robust evaluations of third parties prior to Aberdeen engaging in dealings, as well as having poor ongoing oversight.

 

Brand

Reputation could be damaged if brand or marketing activities are inconsistent with our culture or operations.

 

Legal and regulatory

Aberdeen operates in a complex and dynamic regulatory environment. Risks arise from legal and regulatory obligations and the failure to correctly interpret law or changes in the law which may materially and adversely impact the Group. It may also be subject to regulatory sanctions or loss of reputation from failure to comply with regulations.

 

Liquidity risk

The Group aims to have sufficient liquidity to meet its liabilities when due under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

 

Credit risk

The Company faces credit risk as a result of counterparty exposure. The principal risks are in respect of deposits placed with banks.

 

Foreign currency risk

The Group’s results are reported in sterling. Due to the geographically diverse locations in which Aberdeen operates, business is conducted in a number of currencies. These include the US dollar, Singapore dollar and Euro.[9]