Aberdeen Heads to Standard Life Merger With Slowing Outflows

(Bloomberg) -- Aberdeen Asset Management Plc is heading to its marriage with Standard Life Plc with slowing outflows and improving profitability as investors return to its emerging-market strategies. The shares jumped to the highest level in almost two months.

“Obviously being overweight in emerging markets and emerging-market debt in our global portfolios has helped performance,” Chief Executive Officer Martin Gilbert said on Bloomberg TV on Tuesday. The company saw positive flows into emerging markets in the second quarter for the first time in about four years, he said.

The merger of Aberdeen with Standard Life will put the joint company into competition with Lloyds Banking Group Plc's Scottish Widows insurance unit, some of whose assets are managed by Aberdeen. Gilbert said he's confident that the arrangement, which involves about 100 billion pounds and accounts for as much of a third of Aberdeen's assets under management can continue after the merger.

“We have a good relationship with Scottish Widows and hopefully we can make them see the benefit of this transaction,” Gilbert said. “They are the type of client I'm speaking about who can see the benefit of a larger team managing their money with broader capabilities.”

The asset manager is seeing a drop in redemptions as concern eases that Donald Trump's election as U.S. president last year would slow world trade and hurt emerging-market economies. Favorable markets and 70 million pounds ($90 million) of cost cuts combined to boost profit the company said in a statement.

Net outflows fell to 13.4 billion pounds in the six months through March from 16.7 billion pounds a year earlier, Aberdeen said. In the second quarter, clients pulled 2.9 billion pounds compared with 10.5 billion pounds in the previous three months. Assets under management climbed about 5 percent in the first half to 308.1 billion pounds, while underlying pretax profit surged 20 percent to 195.2 million pounds.

The shares rose as much as 4.1 percent in London trading and were up 3.8 percent at 288.9 pence as of 11:00 a.m.

The combination of Scotland's two biggest money overseers comes as active asset managers have been seeking cut costs via expansion and compete with passive funds that charge lower fees. The merger may result in savings of as much as 300 million pounds, RBC Capital analyst Peter Lenardos said earlier this month.

Aberdeen's emerging market strategies had net inflows of 800 million pounds, reversing an outflow immediately after last year's U.S. elections, and the medium and long-term outlook “remains compelling,” Chairman Simon Troughton said.

To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net.

To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Ross Larsen