Emerging markets have been the cause of outflows at Aberdeen – so the company has to remind people about its other capabilities, Campbell Fleming tells Nick Fitzpatrick.
If you think of Aberdeen Asset Management as predominantly an emerging markets house, then think again. This is the message that Campbell Fleming, who joined the firm earlier this year as global head of distribution, wants to broadcast.
Aberdeen, which has been hit with outflows from its large emerging markets business over recent years, is also a quant investor, among other things.
“People probably know us as an emerging markets house but we run almost as much money in active quant as we do in emerging markets equities and bonds. We also have a massive ‘solutions’ capability, over £100 billion (€120 billion). The reality is, we have everything from real assets to active quant,” Fleming says.
He wants to promote this “compelling and interesting waterfront” to make more of Aberdeen in the global markets where it operates.
“The most interesting challenge is that although we have a great global footprint and a great set of investment capabilities, we have not necessarily leveraged both, in the sense that some markets where you’d expect us to be stronger, we’re not,” says Fleming. This includes the UK, where the firm is based.
He feels that Aberdeen will add assets in the years to come as its capabilities are in tune with investor trends: high alpha, alternatives, smart beta and solutions. “These are the asset classes expected to grow over the next decade. We have them and we have to become better known for them.”
He insists that Aberdeen is not a closet-tracking house. “We are extremely active with a distinct style.” The trouble is, clients might sometimes think that’s “a bit too rocky for them”.
This relates to what Fleming describes as a “structural element” to the firm’s outflows. “[There are] clients who have decided to asset allocate away or take risk off the table. Invariably that’s been done at a time when performance is pretty strong and they have left happy. There are other areas where there’s a secular decline going on. Put those together and it’s an ugly picture, but it hides a strong business underneath that’s generating decent revenues and good headline growth.”
This loss in assets and the negative publicity it generates has happened at a time when, like other asset managers with global distribution activities, Aberdeen is parading in front of global banks as they undertake a “massive selection exercise”.
The firm is working to stay on platforms as fund selectors at global banks shorten their buy lists.
“I’m confident we’ll get there because we have a great brand and mostly a great track record. Where we don’t have a good track record, people understand it’s nevertheless performing as purposed.”
He says fund buyers at global banks are globalising their buylists and to some extent their portfolios, with regional or local tweaks. For fund manufacturers, this means having a local presence: “You either arrive in numbers and support the business, or sit back in head office and play at it.” Aberdeen has about 500 people in distributions, he says.
Fleming says he’s watched with interest the evolution of the fund platform industry over the past 20 years. The latest evolutionary jump, of course, is robo-advice.
In January 2016, Aberdeen completed an acquisition of Parmenion Capital Partners, a firm based in Bristol, UK, with – at the time – £1.9 billion of assets under management (AuM) and 900 adviser relationships. A Fintech 50 firm, Parmenion can be described as a robo-adviser.
“Parmenion is nearing £3 billion on platform and is one of Europe’s leading robos,” says Fleming.
Aberdeen made the investment to be at the “forefront of the digital revolution”, according to the firm’s chief executive, Martin Gilbert at the time.
So, what is Fleming learning from this latest evolution in the platform industry?
“I’m not sure robo will replace the human interface, but it will make it more effective and it will also allow firms to extend their reach into segments and client bases that they were hitherto not able to because of costs or information problems.”
Parmenion, which offers 140 model portfolios, “is one of the best platforms I’ve ever seen – and I’m not saying that just because it’s part of the group”.
He offers up robo as a solution to the pensions crisis. “It is good for all economies around the world where there is a savings gap. There are trillions of dollars in low interest bearing accounts and I find it crazy that people aren’t in [tax-efficient cash and equity savings products] to get their money working better for them.”
Look at the fantastic track record, he says, that UK income funds have had over the past five years as interest rates plummeted.
Fleming is not keen for digital to interfere with human relationships between fund sellers and customers. He makes this clear while talking about the ‘target markets’ requirement of the Markets in Financial Instruments Directive II (MiFID II). This EU regulation will force fund manufacturers to ensure distributors are selling their funds to the right type of clients. It will entail the flow of customer information from distributors to fund managers.
Not only would there be another role for technology here, but it also reflects how asset management firms are heavily dis-intermediated from their end customers.
“Keeping close to clients and knowing what they are doing is important and [MiFID II] won’t take away from the fact we need to be close to clients to know them better than what we could from the data,” he says.
“We are very client-focused. I know a lot of firms say that, but I really think we are.”
Optimism for digital may be high, but even with all the computing power in the world, many savers and investors would be turned off by asset management just because of the lingo. When asked what he’d change about the industry, Fleming singles out the language.
“The industry talks about AMCs, TERs, beta, alpha, gamma and delta. That’s discombobulating the average consumer.
“What I’d like to see is, just as food consumers now know what they are buying, it would be good if the industry adopted a food-labelling approach.
“Then people might know what they are buying and why they need it more.”
©2016 funds europe