Aberdeen touts new M&A rush as flows improve

LONDON Mon Nov 30, 2009 9:02am EST

LONDON (Reuters) - Aberdeen Asset Management (ADN.L), the acquisitive UK fund manager, predicted a fresh round of consolidations in the sector next year and said it has its eyes leveled at the fund of hedge funds sector.

The company also said on Monday that net withdrawals of client money had slowed sharply in the second half-year, as rebounding markets and better fund performance sparked "dramatic" inflows into equity products.

"The outlook is very encouraging at the moment because of the triple whammy of cost cutting, much better markets and the Credit Suisse (CSGN.VX) (UK funds) acquisition," Chief Executive Martin Gilbert told reporters during a conference call.

A rash of M&A deals in the industry in the middle of this year undershot the expectations of some, who had predicted a reshaped industry while valuations hit new lows.

However, Gilbert said that as markets have recovered, there were more acquisition opportunities on the table.

"People feel they are not selling at distressed levels and we are seeing lots of competition from big U.S. houses such as BlackRock (BLK.N) and also private equity," he said.

Over the last four years, Aberdeen has made seven acquisitions, the most recent being the Credit Suisse assets buy.

Earlier this month, the fund firm acquired the contract to manage the Bramdean Alternatives Fund from Nicola Horlick's Bramdean Asset Management. In the past, Gilbert has said he would also like to make an acquisition in the United States.

Gilbert said the firm remained interested in acquiring a fund of hedge funds business, but admitted there were no imminent prospects on the table.

"Fund of hedge funds would be a nice one for us to get into," he said. "I don't subscribe to the view that hedge funds are dead; quite the reverse. I think they are going to grow strongly in the next few years."

PROFITS

For the year ended September 30, total net outflows were 10.7 billion pounds. Pretax profits fell by 10 million pounds to 85.1 million for the year, slightly ahead of a consensus forecast of 18 analysts compiled by Thomson Reuters I/B/E/S.

Gross inflows were 19 billion pounds while gross outflows were 29.8 billion, mainly from fixed income. The company also reported some 3.6 billion in unfunded new business at the end of September.

Aberdeen said inflows in the second half picked up sharply to 13.7 billion pounds compared with 5.4 billion in the first half of the year.

In the wake of the credit crisis fund firms have grappled with lower assets under management, triggered by falling markets and client redemptions, which have dented revenues. However, a rally in global markets and a return of investor confidence is helping to drive a recovery in the sector.

Schroders (SDR.L) recently reported net inflows of 7 billion pounds for the third quarter, while last month, Prudential Plc's (PRU.L) fund arm M&G said net inflows for the third quarter were 2.5 billion pounds, a 47 percent rise year-on-year.

Aberdeen's assets under management increased to 146.2 billion pounds compared to 111.1 billion pounds in the previous year, boosted by the acquisition of Credit Suisse's UK asset management unit.

Aberdeen's shares pared early gains, falling back to 139.6 pence at 0945 GMT after hitting a high of 144.90 pence early on Monday.

Broker Altium Securities retained its 'hold' recommendation, and cheered the firm's decision to nudge its total full year dividend to 6.0 pence from 5.8 last year.

(Editing by Karen Foster)

($1=.6105 Pound)

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