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One of the hardest years to invest in memory, Abrdn boss laments as market turmoil rocks Scottish investment house
Abrdn lost in what his boss called “one of the most difficult investment years in living memory.”
The poor performance of the Scottish investment house, listed on the FTSE 100, came as it struggled with adverse markets, growing customer churn and a difficult stock-picking environment for its asset managers.
Under pressure, CEO Stephen Bird said: “The global economy has changed dramatically in 2022.
Busy: Abrdn chief executive Stephen Bird (pictured) said the investment house was beset by adverse markets, increasing customer churn and a tough stock-picking environment
Nearly all asset classes fell in value as the cost of money soared to quell rising inflation.
“The world in which we and our customers operate today is radically different from the environment of the past decade.”
His comments followed a dismal run of results that saw Edinburgh-based Abrdn post a £615m loss for 2022 after a £1.1bn profit the previous year.
Net outflows from its funds reached £10.3bn as clients withdraw their money – much worse than the £3.2bn it recorded in 2021.
The core investment division – the largest part of Abrdn’s business – saw assets under management contract by 19 per cent to £376 billion, as the value of many stocks and bonds fell on rising global interest rates.
It came as Abrdn’s fund managers battled skyrocketing inflation following the Russian invasion of Ukraine, which forced central banks to raise rates at historic rates to prevent prices from spiraling out of control.
As a result, investors headed for the exit and markets fell around the world.
The Dow Jones lost 9 percent last year, the S&P fell 20 percent and the Nasdaq lost 33 percent. The FTSE 100 was the only major index to post a gain, up 1 percent.
Abrdn rivals Jupiter and Schroders suffered the same fate as the stock picking trade struggled to find winners amid massive geopolitical uncertainty and recession fears.
John Moore, investment manager at RBC Brewin Dolphin, said: ‘Outside of oil, broader energy and some bank stocks, everything else was considered high risk.
A high inflation environment makes it difficult for mid and small cap stocks, which do not generate huge cash. With the end of the war in Ukraine not yet in sight, this will probably continue.’
Abrdn isn’t the only big name to take a beating – star stock voters Terry Smith and Nick Train, in particular, also struggled to negotiate the markets last year.
In January, Smith launched a devastating attack on central banks for a prolonged period of “easy money,” warning that they now risk pushing the global economy into recession as interest rates continue to rise to address skyrocketing inflation.
Warning: Star stock voter Terry Smith (pictured) slammed central banks for a prolonged period of ‘easy money’, saying they now risked pushing the global economy into recession
Its flagship fund, Fundsmith Equity, suffered a 13.8 percent decline in 2022. Moore added, “Terry was struggling.”
But a handful of money managers have braved the fray, including Man Group and St James’s Place (SJP).
Man posted an 18 per cent profit increase to £779 million for 2022 yesterday, after the world’s largest publicly traded hedge fund company saw assets under management rise to £118 billion at the end of the year.
Similarly, SJP posted an increase in full-year earnings supported by strong new business streams.
Analysts said Man benefited from its computer-driven macro funds, while SJP has developed a very strong retail business.
But Abrdn – which is still one of the largest fund managers in the UK with £500bn in assets and around a million small shareholders – has plenty of work to do.
Born from the unfortunate merger of Standard Life and Aberdeen Asset Management in 2017, the company hired Bird from Citigroup in 2020 to restructure the investment giant. Under the former investment banker, the company has closed funds and sold assets at a rapid pace.
Yesterday it announced the sale of its discretionary fund management arm to a Liechtenstein-based private bank for £140 million.
But while some of the restructuring under Bird seems to be paying off and last year’s acquisition of Interactive Investor proved fruitful, for many in the City the turnaround is not coming fast enough and patience is running out.
David McCann, Analyst at Numis, said: “We continue to think that a more radical strategy is needed to turn the group around and maximize value, such as breaking up the group with capital returned to shareholders, or selling of the group completely.’