Despite investing other people’s money, ABRDN’s [ABDN] share price performance has been something of a damp squib.
Last year, the protracted downward spiral of the asset manager’s stock that kicked off following the mega-merger between Standard Life and Aberdeen Asset Management in 2017 continued. The fallout included Lloyds Bank shifting £109bn of Scottish Widows business elsewhere. Not helping the investment case has been continuing net outflows.
Yet, ABRDN’s rebranding and aggressive investment in firms such as Interactive Investor may be the beginning of a transformation of the one of Britain’s largest asset managers. Sceptics remain concerned about the company’s actual performance and whether the pricey acquisition of Interactive Investor is likely to be effective from a business perspective.
Can the stock recover and offer investors long-term growth?
How is ABRDN’s share price performing?
ABRDN’s share price has been trading flat so far in 2021, closing Friday 4 February at 239.8p. However, over the 12 month period the stock has experienced a 24% slump as the asset manager continues to experience net outflows. That performance is in contrast to rivals LGEN [LGEN] and Prudential’s [PRU] respective 11.57% and 47% gain, and of the pace of the benchmark FTSE 100’s 15.76% gain over the same stretch
Is Interactive Investor purchase a shrewd move?
The Edinburgh-based investment company, formerly known as Standard Life Aberdeen, caught plenty of flack after rebranding itself ABRDN last year. Dropping the vowels from Aberdeen was met with ridicule in some quarters, with jokes around the correct pronunciation of the new name.
Despite the controversy, Stephen Bird, chief executive at ABRDN (pictured above), told Insider.co.uk, that he would go through the rebranding again, pointing to research that shows that the company is now the second most recognised asset manager in the UK, second only to Blackrock.
Having succeeded Martin Gilbert at the helm, Bird has made some difficult choices, such as cutting dividends by a third, and some forward thinking acquisitions. Flat-fee investment platform Interactive Investor cost ABRDN £1.49bn back in December - a move Bird justifies as buying into a market challenger.
Certainly the acquisition sets it apart from other asset managers. Platforms like Interactive Investor that offer investing tools directly to the public boomed during the pandemic. According to a Reuters article from December, these direct platforms were the fastest growing area of the investment industry. In the 12 months up until 2021, assets under management on them grew 40% to £289bn. Interactive Investor itself has 400,000 customers and £55bn in assets under management.
“This is a unique opportunity and a transformative step in delivering our growth strategy,” Chief executive Stephen Bird commented on the acquisition.
“This is a unique opportunity and a transformative step in delivering our growth strategy” - ABRDN CEO Stephen Bird
Purchasing Interactive is part of a strategy that Bird and Sir Douglas Flint, chair of ABRDN, hope will enable the company to expand beyond its core wealth management and institutional offerings. Although the acquisition hasn’t come cheap with one analyst telling the Financial Times that the deal is ‘completely central to the survival of the CEO and chair.’
The deal is expected to be signed off at a general shareholders meeting in the first quarter of this year.
Net outflows continue
ABRDN has experienced net outflows since the middle of last decade. The last time ABRDN updated the market was in August when it posted half year results for 2021 with net outflows coming in at £5.6bn, although that was an improvement on the £24.8bn seen in the first half of 2020. Fee based revenue rose 7% to £755m, with adjusted operating profits coming in at £160m, up 52%.
However, not everyone’s convinced. Analysts at Berenberg downgraded ABRDN’s stock to a Hold at the end of January, along with chopping their price target from 285p to 260p. Despite growth in its investment business, Berenberg analysts are concerned over the firm’s core business growth and believe there is a risk that a lack of exposure to ETFs could lead to problems if its active funds continue to haemorrhage cash.
Full year results are expected 1 March. Net outflows and further strategic insight on how the acquisition of Interactive Investor will lead to long-term growth will be poured over by investors.
Among the analysts polled by Refiniv, ABRDN’s stock has an average 273p price target, representing a 13.8% upside on Friday’s close. Of the 16 analysts offering ratings, just under half have rated the stock a Hold.