Aberdeen AM Looks to Smart Beta

Shanny Basar

Martin Gilbert, chief executive of Aberdeen Asset Management, said the firm has no plans to launch exchange-traded funds but wants to compete in smart beta, which will be a growth area after its merger.

Gilbert spoke in London with Jake Moeller, head of Lipper UK & Ireland research at Thomson Reuters on 21 July. In March Aberdeen and Standard Life agreed an £11bn ($14.4bn) merger which is due to  complete next month. Keith Skeoch, chief executive of Standard Life and Gilbert will be co-chief executives of the new company.

The combined firm will compete with passive asset managers who charge lower fees and have been attracting inflows. Assets invested in ETFs/ETPs listed globally reached a record of $4.2 (€3.6) trillion at the end of first half of this year according to ETFGI, an independent research and consultancy firm.

Martin Gilbert, Aberdeen Asset Management

Gilbert told Moeller: “We have no plans to launch ETFs. However we will compete in smart beta, an area on which both firms are very positive and looking to grow.”

Aberdeen defines smart beta as non-market capitalisation, systematic (rules-based) investment strategies designed to deliver targeted exposure to ‘risk premia’ factors more efficiently (smartly) than a market capitalisation weighted index.

In May Aberdeen launched its first smart beta fund, the Smart Beta Low Volatility Global Equity Income Fund, with $139m of client capital. The fund offers exposure to five targeted ‘risk premia’ factors: value, quality, momentum, small size and low volatility and aims to provide investors with risk-adjusted returns with an emphasis on income generation and a lower volatility than of global equity markets over a full market cycle. The asset manager said the fund launch was the precursor to the introduction of a suite of proprietary smart beta indices.

David Wickham, global head of smart beta at Aberdeen, said at the time: “Smart beta is one of the fastest growing segments of the asset management industry. Given these trends, interest in smart beta products, and multifactor ‘risk premia’ strategies in particular, is building as investors see the advantages of conventional indexing but are keen to target higher risk-adjusted returns. Smart beta is thus a third approach to investing that provides a pragmatic and cost-effective core solution to current investor needs.”

Gilbert also identified alternatives and the Australian market as potential growth areas for the new company. He continued that  the new firm was unlikely to make significant acquisition in the  next few years while the merger was being digested.

Aberdeen reported assets under management of £302.7bn in the firm’s trading update for the three months to  31 December 2016, with gross inflows of £10.2bn during the quarter.

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