Discipline over margins will pay off

FIRST appearances can be deceiving. At the headline level, Aberdeen’s assets under management (AUM) fell four per cent to £176.2bn in the two months to 28 February. However, most of this can be explained by falling stock markets and foreign exchange movements. A more accurate measure is net inflows, which were £0.2bn in the two month period, made up of £1bn in equites inflows against £0.2bn of outflows in mixed income and a further £0.6bn elsewhere.

Still, there is much to suggest that Aberdeen is ready to put in a robust showing in the months ahead. The new equities business, for example, is being won with a more meaty margin than before, with the management fee margin earned on AUM running at 39 basis points against 37bps in the year to 30 September.

In its emerging markets business, funds are still being won but at a slower rate than before. But this has more to do with Aberdeen’s refusal to accept weak margins despite the recent nervousness in this area.

Given improving margins on new inflows and high operational gearing, we expect significantly better share price performance in the months ahead