UK Edition
Questor: Will President Trump smooth the way for an Aberdeen deal? Don't bank on it
It has been a busy January for Martin Gilbert. First, the chief executive of Aberdeen Asset Management darted off to Davos, hosting as usual one of the more convivial parties for World Economic Forum delegates in the gem store he commandeers for the week on the main drag.
Then it was over to Washington for the presidential inauguration. Gilbert got to know Donald Trump through his Scottish golfing interests.
In between times, as deputy chairman of Sky, he must make sure the media company acts with the utmost probity as Rupert Murdoch’s 21st Century Fox moves to acquire the 61pc it does not already own.
This week it is back to the day job for Gilbert, and he might wish he was somewhere else. Aberdeen looks on course to register a 15th consecutive quarter of net outflows, and analysts fear for the dividend.
The stock has been friendless since the annual results in November, and Gilbert’s pal in the White House is partly to blame.
The emerging-markets sell-off that caused Aberdeen so much pain was moderating just as Trump won the US election, only for Wall Street investors to repatriate funds from overseas.
So although Aberdeen’s emerging-market equities operation recorded a net inflow of £600m in the quarter to September, it could have been a false dawn.
Only the brave view the hiatus before Trump details his policies as an emerging-markets opportunity, and rival fund manager Ashmore, a specialist in the area, suffered outflows in the quarter to December.
Overall, Aberdeen is expected to say the same, given it earlier flagged the loss of two large mandates during the period that analysts at Barclays estimate account for £3.4bn of assets under management.
The other factor is the Financial Conduct Authority’s demand that asset managers put aside more risk capital, which has shrunk its surplus capital to a skimpy £60m.
It would be a prudent time for Aberdeen to rebuild its buffer, but the dividend is only just covered. Hence Barclays writing that cutting the annual payout from 19.5p to 15.5p would be the right thing to do.
Paul McGinnis at Shore Capital isn’t explicitly forecasting a cut, but he cautions against using the 7pc yield as any kind of prop for the shares.
Don’t expect Gilbert – who has admitted he is less confident about holding the dividend than a year earlier – to put a number on it this week.
Would that Aberdeen could escape to a less costly regulatory environment. Investment group Henderson did just that when it merged with Janus Capital last autumn and ditched its London listing. Gilbert casts his eye over the US regularly but has yet to find the perfect partner.
His last deal of note, acquiring Scottish Widows Investment Partnership from Lloyds in 2013, broadened the firm’s multi-asset capability but investors have been disappointed by outflows.
Aberdeen resisted bidding big last year to acquire UniCredit’s Italian asset manager Pioneer, which went to France’s Amundi. Bankers confidently expect more merger activity as the industry contends with pressure to drive down fees, as well as the shift to passive funds.
Active managers will have chance to show their mettle as quantitative easing programmes that inflated assets are wound down but it is clear from the competition and demands to invest in technology that scale matters.
Aberdeen certainly has that – its assets under management rose 3.6pc to £312bn at the last count – but it is not such a giant that observers don’t ponder its future.
Would Trump swap his “America First” mantra for “Aberdeen First” to smooth the path for a transformational deal for his golf chum? Don’t bank on it. Avoid for now.
Questor says: Avoid
Ticker: ADN