Aberdeen chief scoffs at the rise of passive management
Passive index investments are “a nonsense” according to Hugh Young, Aberdeen Asset Management's managing director for Asia.
But the industry veteran told AsianInvestor that the rise of passive products could be an opportunity for active managers to exploit increasing anomalies in the markets.
And in terms of the overall Asian investment space, Young said he saw Indian equities as a better bet than Chinese stocks, but expects the region to enjoy only tepid growth this year.
The Singapore-based fund management veteran said that he accepted the seemingly remorseless rise of passive management in the region - and is even enthusiastic about the advantages this trend gives active specialist firms like his own.
“As an active manager one never likes to see money flowing out of our funds, but from an intellectual point of view, the more that goes into passive the better,” he said.
“In a pure investment sense the more people don’t think about investments, and don’t make any intellectual judgment, it must mean there will be more anomalies for active managers to exploit."
Passive fund products have been rising in popularity in recent years, with exchange-traded funds appealing to investors owing to their simplicity and affordability. Young added that while he wasn't a huge supporter of passive funds, he understood why people bought them.
Last week Young told AsianInvestor he was happy to see Standard Chartered, in which Aberdeen is a major shareholder, replace its group chief executive. He also questioned the need for the bank to replace Jaspal Bindra, its Asia CEO, when he steps down next month because of his concerns that the firm's board was top-heavy.
Looking at the key regional market opportunities this year, Young admitted he had a problem with stocks in China: “From an equity point of view, we have found China very difficult, just finding companies of the right quality.”
He sees Indian equities as a better bet, but expects the region to enjoy only tepid growth this year, adding that Aberdeen was a ‘little wary’ on the price of Indian companies, with the distinct possibility that many were already fully-valued.
To overcome this, Young said that the high expectations placed in reformist Prime Minister Narendra Modi needed to filter through to the bottom line of Indian firms.
However, from the fixed-income perspective Young noted the differences between China and India were not so clear-cut. There are quality bond opportunities in both China and India, he said.
Aberdeen manages assets worth $504.1 billion, as of December 31 last year.