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Gilbert warning on economic turmoil

ABERDEEN Asset Management chief executive Martin Gilbert has warned of years of economic woe in developed countries but he remains confident his investment house can prosper as it recorded £1.1 billion of net fund inflows in the latest quarter.

Optimism: Chief executive Martin Gilbert believes Aberdeen Asset Management is well placed to prosper.
Optimism: Chief executive Martin Gilbert believes Aberdeen Asset Management is well placed to prosper.

The movement of funds was better than City analysts had expected, although the company's shares finished the day down 6.7p or 1.7% at 385p.

The inflows were concentrated in its equities business as investors poured cash into Asian and emerging markets portfolios. Aberdeen's assets under management rose from £187.2bn at the end of September to £193.4bn as the year closed.

Mr Gilbert said: "The economic problems of many developed world countries are likely to remain a challenge for growth and markets for some years to come.

"However, Aberdeen's focus on fundamentals and expertise in a wide range of asset classes leaves us well placed to continue to meet the needs of our clients."

A recent deal averted the so-called fiscal cliff in the United States, while the new year has seen an easing of worries about eurozone sovereign debt.

But Aberdeen's chief investment officer Anne Richards told The Herald the underlying tensions in many developed economies, particularly regarding high levels of Government debt, remained.

In the US, another spending deal has to be thrashed out before March, she said, while in Europe plans to tackle the debt crisis will take 10 years to play out.

"There is a sense of coming to a new world, people are getting more optimistic," she said. "At one level that is terrific. But what we are saying is 'do not lose sight that there is still these imbalances out there'."

Ms Richards indicated that UK Government borrowing could become more expensive.

"We think this is a year when the bull market in bonds we have had for the last 10 years is going to falter," she said adding that investors are likely to reappraise some government debt. "Investors have been lending to the US and UK Governments at less than 2%. We do not feel that is a particularly good risk return ratio," she said.

This could lead to increased interest in emerging markets assets. Aberdeen has built strong teams investing in equities and bonds in emerging markets, particularly in Asia. This was reflected in the net £3.1bn that surged into Aberdeen's equities portfolios in the last quarter of 2012.

The Scottish fund manager was forced to keep a restriction on its emerging market equities offerings to protect performance, noting that inflows "have continued at a higher rate than we are comfortable with".

This flow into equities exceeded client withdrawals from fixed income, property, money market and alternative investment products. But the company's emerging markets debt funds did attract new money. Asked if the company was concerned about continuing outflows, finance director Bill Rattray said: "It is a worry. We never like to lose client assets."

But he insisted its performance in the asset class has picked up substantially since the credit crunch. Market and foreign currency movements added £5.1bn to the growth in assets.

Aberdeen said the net fund flows for the quarter will add around £30m in annual fee income.

Rae Maile, analyst at JP Morgan Cazenove wrote: "Aberdeen offers a compelling mix of fund inflows, improving revenue margin and strong operating leverage."

All resolutions discussed at Aberdeen's annual investor meeting yesterday were passed although 11.4% of shareholders opposed its pay report.

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