There is definite proof that sustainability-focused funds are outperforming their conventional counterparts. But some experts believe the traditional explanations for this are wrong.
ôThe inflows have just been huge,ö he says. ôThis isnÆt an issue about performance but about managing growth. ItÆs in the areas of the middle and back offices and in client service where we have hit constraints.ö
Aberdeen already outsources many processing functions. ôBut we canÆt outsource responsibility,ö he says, adding that global custody banks and other service providers are also operating at peak capacity.
Aberdeen û which was founded in the eponymous Scottish city but has since moved its main investment operations to London and Singapore û began with $50 million under management. After 10 years it still hadnÆt reached $1 billion AUM. But growth since has been rapid, thanks in part to acquisitions including parts of the old Morgan Grenfell business, and the firm now manages $200 billion, with investment teams in Sydney and Philadelphia as well.
Of that $200 billion, half is in global fixed income, with another $80 billion in global equities (of which around $35 billion is Asian equity) and $20 billion in real estate. The business in Singapore, which amounts to around $50 billion, is skewed differently, with 80% in equities and 20% in fixed income.
Gilbert met with AsianInvestor in Hong Kong having just come from a trip to Beijing, which is becoming a more regular destination given the huge buildup in assets there. But what most impresses the CEO is the size of assets in the United States.
ôI know everyone focuses on the deficits and lack of savings in America. But the accumulated wealth there is staggering,ö he says. And institutional investors in the US are just beginning to diversify overseas in a serious way. One of the main drivers of AberdeenÆs business is to provide Asian and emerging market asset classes to US (and European) institutional investors. The firm works to place its Asian equity expertise in global products.
Because Aberdeen has already closed Asian equity funds to new clients (it continues to accept new money from existing clients, and its retail funds remain open), its new emphasis is on global emerging markets, which will include an allocation to Asia. ôWeÆre shifting our global client base toward global emerging markets,ö Gilbert says. ôWe keep it very simple.ö
He expects the halt on new clients for global fixed income will be a ôpauseö rather than a long-term stoppage. The firm still has $5 billion in mandates that havenÆt yet been funded, so it will continue to enjoy growth despite its decision to close the gates. Most of its fixed-income portfolios invest in the US and European markets, but Aberdeen is also an early mover in running Asian bond portfolios. ôWe may be too early but itÆs better to be early than to be late,ö he muses.
Gilbert predicts that Asian fixed income will mature into a proper asset class and a big business, as local companies seek to diversify sources of capital, and as investors compare various markets. But this also requires internal changes, as the largest markets currently impose capital controls.
His main worry for next yearÆs business is the continued fallout from AmericaÆs subprime mortgage debacle. Reports of estimated total losses in mortgages range from $300 billion to $1 trillion, but so far only about $25 billion has been reported. Many pension funds and insurance companies have yet to declare their results, and no one knows where this paper is placed. Asian institutional investors have exposure to triple-A rated tranches of CDOs that could be damaged if many mortgages end up marked to market at a steep discount.
But as a fund manager, he believes this is an opportunity to boost returns. ôWe can make a lot of money if we do our research and buy certain mortgages off distressed sellers,ö Gilbert says.
Investors can still find spread premiums in niche private debt, with the asset class's prognosis looking strong, said a keynote speaker at AsianInvestor’s latest summit on Wednesday.
AsianInvestor details the second part of our marquee award winners for 2021, which includes the standout ESG adviser and also the asset manager of the year.
AsianInvestor reveals the first half of our marquee winners for this year's Asset Management awards, including best asset service provider and top alternative fund houses.
The number of millionaires in mainland China grew by 35% in 2020, while the number of millionaires in Hong Kong fell by 7%, according to a new report from the private bank.