Aberdeen: Reopening EM fund would invite ‘short-term money’
Aberdeen Asset Management is unlikely to reopen Devan Kaloo’s Emerging Markets Equity product in the near future despite additional capacity becoming available, a senior figure in the company has said.
Martyn Gilbey, Aberdeen’s head of business development, UK, said the fund house had no plans to remove a 2 per cent initial charge on the offering, in part because this would put it at the mercy of “short-term” investor sentiment.
“There is additional capacity, created because of where valuations have been in the last couple of years. But we are keen to control flows.”
By the end of March 2013, at the time the fund’s soft-closure was announced, the strategy had reached a size of £4.1bn. Over the subsequent three years, during which time returns dropped by 13.3 per cent, the strategy shrunk to its current level of £1.4bn.
However, Mr Gilbey believes capacity restraints on the fund have allowed the company to sustain a “match-up” with investors focused on long-term performance, who are less likely to be distracted by the volatility troubling emerging market products.
“We are not interested in a lot of short-term money coming in and out,” he said. “It’s important that we have got a good match-up of our investment philosophy and the type of investor [in the fund]. We have got deep support, including institutional investors. We know the majority of them directly.
“It’s important that people invest because they understand our products.”
The fund has shown signs of a return to form this year after underperforming since its soft-closure in 2013. On a 12-month view it is now second quartile in the IA Global Emerging Markets sector, though it remains third quartile on a three-year basis, according to FE Analytics.
Mr Kaloo, Aberdeen’s global head of equities, has called for jittery investors to remain calm amid a variety of emerging market headwinds.
“If you strip out resource companies and look at earnings in local currency terms rather than US dollars, the 2015 [earnings] figure is actually likely to come in at over 10 per cent,” he said last week.
“The trend is one of improvement: revenue growth is forecast at over 6 per cent this coming year; factor in some operating leverage on expected cost control across our universe, and earnings growth could possibly break the 10 per cent mark in 2016 as well.”
Mr Gilbey’s capacity comments come after another emerging markets specialist, First State Investments, reopened a fund earlier this year after it fell in size.
In February, the fund house reopened Martin Lau’s Greater China Growth fund some four years after it had been closed to new investment.
A 4 per cent initial charge had been imposed on new investments in January 2012 when the fund had more than £600m in assets under management, but that figure subsequently fell to less than £400m.
