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Aberdeen Asset Management (Aberdeen) has been one of the dominant forces investing in Asia and Emerging Markets for some time, with two thirds of their $480 billion (as of end June 2015) assets under management in those two sectors. Aberdeen is in the process of making a number of major organisational changes. These have seen Devan Kaloo, the former head of Emerging Market equities, promoted to global Head of Equities within the group. At the same time Hugh Young, the pioneer of the investment process at Aberdeen, will pursue a broader role at the company. At present the members of the Aberdeen Asia equities team have a combined role of portfolio manager/sector analyst. Given the recent changes in the management structure we are looking to understand whether the investment process is likely to change.
Our rated Aberdeen Asian funds have underperformed the benchmark in recent years. We believe this in part reflects the funds’ relatively conservative positioning in companies with strong corporate governance practices and their heavy underweight to China, relative to the benchmark. These funds have a lot of holdings in common and have been (and still are) underweight India relative to peers, although recently to a lesser extent. The Indian equity market rallied sharply in 2014, helping returns of funds heavily exposed to Indian businesses. Moreover, Aberdeen Asia funds are balanced in style and more value-tilted than most peers, e.g. they hold equities of the troubled bank Standard Chartered and resource stocks BHP Billiton and Rio Tinto. Finally, the funds are underweight internet and technology stocks, which have performed well recently but are considered to be lacking transparency and are believed to have rather poor corporate governance practices. Whilst we hold the Aberdeen’s investment team in high regard, relative underperformance for the last few years should now provide something of a wake-up call. Considering the above, we are lowering this fund’s rating from four to two-star hold.
We have taken these funds out of our top-rated funds.
The property market is illiquid and this can, in exceptional circumstances, lead to times in which clients are unable to dispose of part or all of their holding. Property valuations are made by independent agents but are ultimately subjective and a matter of judgement.
The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing.