AFTER weeks of chaos on global markets it may be too soon to make predictions about what the future will hold for investors other than to say some people will probably lose a lot of money while others will make plenty.

Hedge fund managers such as DE Shaw are reported to be raising billions in the expectation that there will be opportunities amid continued volatility.

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For Scottish fund managers there may be a chance to win vindication after years of grappling with challenging developments in the industry.

One big feature of the 11-year bull run that came shuddering to an end last month was the rise of passive investors.

Funds that were constructed to track indices such as the FTSE 100 became hugely popular in an age when it seemed that the only way for markets to go was upwards.

Passives tend to charge lower fees than funds run by so-called active investors, who expect to be able to out-perform them by focusing on stocks or developments that were overlooked by the herd.

The scale of the market shakeup was writ large in the growth of America’s Vanguard amid big outflows of funds from active investors. Founded by Jack Bogle in 1975, Vanguard has become one of the biggest asset managers in the world.

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The shift posed big challenges for Scotland’s fund management industry. This became mighty on the back of decades worth of active management by firms that helped it win global renown such as the former Ivory & Sime.

Scottish fund managers who have spent years trying to make the case for active investing may now find that people around the world are ready to listen again.

With the outlook for markets so uncertain firms that offer index trackers may now find it much harder to get investors’ attention.

Against that backdrop Scotland will have a huge amount riding on the success of one business that has faced big challenges after sticking to its active guns.

Standard Life Aberdeen has become by far the biggest fund manager in Scotland after playing a leading part in the consolidation of the industry. It had £545 billion assets under management and administration at December 31.

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Industry body Scottish Financial Enterprise reckons around £800bn funds in total are managed from Scotland.

Standard Life Aberdeen was created in 2017 following the £11bn merger of Standard Life and Aberdeen Asset Management.

That deal was the biggest in a process that saw the two firms hoover up a series of smaller players.

Standard Life bought Glasgow-based Ignis Asset Management in 2014.

Under the leadership of Martin Gilbert, AAM bought Glasgow-based Murray Johnstone in 2000 and Glasgow Investment Managers in 2007. It snapped up Edinburgh Fund Managers and Scottish Widows Investment Partnership (SWIP) in 2003 and 2013 respectively.

The rationale for the Standard Life Aberdeen tie-up was that it would give the enlarged business the scale and reach to compete in global markets.

The group has distribution capabilities that allow it to sell products that are based on active management around the world.

Given the importance of the business to the Scottish asset management sector, it is a concern that the merger does not seem to have gone smoothly.

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When Standard Life Aberdeen posted a 10 per cent drop in annual profits in March, to £584m, chief executive Keith Skeoch told analysts that 2019 had been a year in which momentum had started to build in the business as the benefits of “heavy lifting” in 2017 and 2018 began to be felt.

He said the company’s investment performance had been strong with 74 per cent of assets under management ahead of benchmark and an improving three and five-year track record.

However, Mr Skeoch noted the positive inflow of funds net of withdrawals in the fourth quarter was the first the company had enjoyed since 2017.

It still recorded net outflows of £17.4bn overall for the year. That followed net outflows of £40.9bn and £32.9bn in the preceding two years.

Directors could argue that these outflows may have reflected the shift to passives.

However, the company has faced challenges as a result of performance issues.

“Net outflows continued reflecting investor sentiment towards emerging markets and equity markets more generally, as well as weaker 2018 investment performance in both Equities and Multi-asset,” said the company in the 2019 results announcement.

Standard Life Aberdeen will pay a high price in terms of assets under management for alienating a big client in the shape of Lloyds Banking Group, which owns Scottish Widows.

Lloyds is moving £70bn formerly managed by SWIP to other firms. The beneficiaries include Schroders.

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With the integration process behind it Standard Life Aberdeen now has the chance to show it can deliver. It has to take it.

It is encouraging that the group has been making progress in areas such as ESG (Environment, Social and Governance) investing, which have been attracting increasing attention.

After selling a controlling stake in its pension business to Phoenix Standard Life Aberdeen is investing heavily in growing its position in the market to provide online platforms that people can use to manage their savings.

This reflects an ongoing shakeup in the long-term savings business which has also impacted other significant Scottish players.

Aegon UK, which owns the former Scottish Equitable pensions business, has refocused on platforms.

What the future holds for its fund management operations in Scotland was unclear even before the recent market chaos.

The UK fund management operation was rebranded as Kames Capital in 2011.

In December Aegon said it planned to integrate its European and American asset management operations to help it compete more successfully with other major global asset managers.

Changes may be coming at other prominent Scottish fund managers amid the continued process of consolidation in the global fund management industry that Standard Life Aberdeen has played a part in.

Martin Currie and Edinburgh Partners are owned by US players Legg Mason and Franklin Templeton. These are in the process of joining forces after Legg Mason succumbed to a $6.5 billion takeover by Franklin Templeton in February.

Consolidation is likely to continue as firms face pressure on revenues that are based on funds under management.

Fund managers’ costs have been increasing in recent years amid regulatory changes in the industry.

The recent market volatility may put many people off investing but with interest rates at record lows savers may not want to leave too much money on deposit.

That may help the offerings of niche players in Scotland to attract interest.

These include smaller companies specialists Amati Global Investors and Aberforth Partners and Saracen, which invests in global equities.

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The venerable Scottish Investment Trust follows an avowedly contrarian approach under the management of a team led by Alasdair McKinnon.

The £612 million trust told investors in March: “Even prior to this crisis, we had found the degree of complacency in stockmarkets perplexing and concerning. We had already positioned ourselves to seek to avoid the ‘hot’ areas of the market which we judged vulnerable to a change in mood.”

The trust’s progress will be followed closely by legions of private investors in coming months.

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One Scottish fund manager may have stronger grounds for confidence than most.

Edinburgh-based Ballie Gifford has provided convincing proof that asset managers based in Scotland can succeed in the face of the rise of the passives.

It had around £220bn under management at December 31, compared with £114bn at the end of 2014, after enjoying remarkable success in recent years.

The firm reckons the fact it is owned by partners has allowed it to think independently and to take a long-term view.

It was quick to spot the potential of innovators such as Amazon.

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