The managing director of Aberdeen Asset Management Asia has told Investment Adviser he is now “overlooking all of [the investment business] and trying to knit it together”, having shifted roles in the company last summer.
“The danger is becoming siloed. It’s a function of acquisitions, [but] we don’t need four or five different teams thinking about the impact of rates going up. My role is a very practical thing, it is getting people to share information,” he said.
The MD, the asset manager’s most senior investment professional, handed over his global head of equities role to Devan Kaloo last July.
A further shake-up to Aberdeen’s investment team came this spring with the departure of chief investment officer Anne Richards for M&G.
But despite having now spent more than three decades at the company himself, and stating Mr Kaloo had “more energy”, Mr Young said he did not yet even have a date in mind for retirement.
“We try to be good at succession planning...it has been a pretty seamless transition. I still enjoy the job, I’ve been enjoying it as much as ever,” he said.
The manager continues to sit on the Asian equities desk, which runs the fund house’s flagship portfolios, and remains particularly involved in “top-level” issues such as corporate engagement.
The fund house has had plenty of engaging to do with firms such as Standard Chartered. Aberdeen is the second-largest shareholder in the company and supported last year’s rights issue, but Mr Young accepted a turnaround would be a “slow haul”.
The bank’s 2015 share price slump contributed to another year of underperformance for Aberdeen’s Asia Pacific equity funds, compounding the problem of an investor flight from emerging markets in a year that saw the fund house suffer over £35bn in net outflows.
In 2016, however, the asset manager’s Asia Pacific Equity fund, now £1.1bn in size, has outperformed its peer group amid slight gains for Asia Pacific indices.
FE Analytics figures suggest the portfolio’s relative performance has lately fared better in rising rather than falling markets, but Mr Young said recent issues were simply a factor of asset allocation rather than market beta.
“We [still] typically do better in tough times and worse in strong times. At a broad level, [underperformance] has been a result of asset allocation. We are light in North Asia, heavy in South-East Asia, combined with the fact that ‘value’ characteristics have had a tough period.”
Emerging market stock performance remains “bifurcated” despite the recent rally, he noted.
“You have got some very cheap sectors, like banks and property companies, but they are cheap for a reason.”
Mr Young said he remained cautious of such areas, not least because attractive valuations are offset by relatively flat earnings growth.
With turnover in his portfolios low, at under 15 per cent per annum, the manager is continuing to favour stocks with stronger balance sheets, such as healthcare companies. The MD said he also sees opportunities in India.
From a macroeconomic standpoint, however, Mr Young retains a cautious stance.
“The economic outlook is still exactly the same: sluggish. There is no evidence the global economy is picking up,” he said.
China still confuses but A-Shares tipped for MSCI inclusion
The Chinese economy continues to dominate the emerging market conversation, and recent weeks have seen signs that policymakers are changing tack as they battle slowing growth.
Mr Young noted more money had been pumped in to the economy in April, sparking a surge in the speculative trading of commodities. He said “a bit of policy dissonance” between president Xi Jinping and prime minister Li Keqiang, with the latter more in favour of Western policy prescriptions such as credit expansion, made it more difficult than usual to predict future actions.
On stocks, he remains cautious of digital giants Alibaba, Baidu and Tencent. He has concerns over Alibaba’s corporate governance, but noted online portal Tencent looked more interesting. “My colleagues have spent a long time analysing [it] but we still haven’t quite got the comfort factor”, Mr Young said.
China’s influence over emerging markets could grow larger later this month. Index provider MSCI is due to announce a decision on whether to include onshore A-Shares in its Emerging Markets benchmark. Mr Young said he believed MSCI would go ahead with the move, but added he was unlikely to react.
“Typically we are sellers as things get included in indices, if prices move higher. But the likelihood is we’ll do nothing.”
