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Asset manager Aberdeen hit by heavy outflows

[LONDON] Aberdeen Asset Management was hit by heavy outflows in the first half of its financial year as investors bailed out of emerging markets and said more was to come, hitting its shares.

The prospect of an interest rate rise in the United States has weighed on a number of emerging markets in recent months as many international investors pulled money amid expectations of increased market volatility in countries with large amounts of dollar-denominated debt.

While British asset manager Aberdeen posted a 25 per cent rise in underlying profit to 270.2 million pounds (S$547 million), largely as a result of its acquisition of SWIP from Lloyds Banking Group last year, the market uncertainty saw billions yanked from its funds.

Net outflows were 11.3 billion pounds against 8.8 billion pounds a year earlier, Aberdeen said, mostly from global emerging markets, global equities, fixed income and multi-asset funds.

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Asia-Pacfic and property flows were positive, however, and positive market performance overall plus a four billion pound foreigh-exchange boost helped to lift total assets by 1.6 per cent to 330.6 billion pounds.

Describing the outflows as "torrid", Chief Executive Martin Gilbert said there was still a lot of negative macroeconomic sentiment towards emerging markets, which is likely to weigh on performance in the short term.

Though Mr Gilbert said he thinks a US rate rise is further away than some have suggested, he added that it would be tough for Aberdeen "until emerging markets come back into fashion".

With the company sitting on net cash of 550 million pounds, investors were keenly watching to see how much, if any, would be returned to them.

In the event, the company announced a share buyback of up to 100 million pounds and said it intends to pay an interim dividend of 7.5 pence per share, up 11 per cent on a year ago.

Early share moves suggested that had not been enough to offset the disappointing outflows. By 0843 GMT Aberdeen shares were down 2.1 per cent.

Describing the results as mixed, Shore Capital analyst Paul McGinnis said the share buyback was a "value-neutral exercise at the current share price" and that the outflows and weak fund performance are "not a healthy combination". "This is now the eighth consecutive quarter of net outflows reported by Aberdeen and the caution expressed in the outlook statement is not suggestive of a reversal in the near term," he said, flagging a "hold" recommendation and 463 pence target.