May 5, 2009 / 1:48 PM / in 9 years

Aberdeen eyes hedge fund buy after tough H1

LONDON (Reuters) - British fund firm Aberdeen Asset Management ADN.L is seeking a fund of hedge funds acquisition as valuations have tumbled after the worst year for the industry on record, Martin Gilbert, Aberdeen CEO, said on Tuesday.

His comments came after Aberdeen posted an 18 percent fall in first half profit and announced a further round of cost cuts aimed at pushing total savings to around 100 million pounds.

The shares were up 3.26 percent, or 4.25 pence, at 134.75 pence by 0931GMT. Cazenove kept its outperform recommendation supported by scope for positive surprises from acquisitions and from the Credit Suisse Asset Management integration.

In a conference call with journalists, Gilbert said merger and acquisition activity in the fund industry remains at unprecedented levels.

“For the first time that I can remember we are seeing far more sellers than buyers,” he said.

Potential acquisition targets for Aberdeen include funds of hedge funds, and the U.S. where Aberdeen has aims to expand, Gilbert told journalists.

“We like the fund of hedge funds area and that’s become more and more attractive over the past six months as valuations have collapsed in that sector as the assets under management have fallen dramatically,” Gilbert said.

EARNINGS

Aberdeen reported a fall in first half to end-March underlying profit before exceptionals to 33 million pounds ($49.03 million) from 47.3 million a year ago.

Net outflows were 8.5 billion pounds in the period, almost entirely from fixed income, leaving assets under management at 96.3 billion pounds compared to 107.3 billion a year ago. Aberdeen’s equity and property funds drew modest net inflows.

Aberdeen said it will target further cost cuts in 2009 of 20 million pounds, in addition to previously announced savings of 77 million pounds, as first half profit fell 18 percent.

Aberdeen is currently in the process of integrating a chunk of Credit Suisse’s fund arm, which it bought in January for $360 million. It closed the Asia Pacific leg of the deal last Friday adding just over 7 billion pounds in assets under management.

The group will seek to make additional cost cuts by reducing headcount, outsourcing back office functions, and reining in remuneration, Gilbert said, adding that the company has achieved a target of reducing overhead costs to 300 million pounds.

On investment performance, Gilbert said the group’s fixed income business has suffered as a result of its overweight position in credit and underweight in government bonds, which have proved popular with risk averse investors in recent months.

Aberdeen’s institutional focus has also played against it with the majority of bond fund inflows in recent times coming from retail investors switching out of cash deposits in search of income, Gilbert said.

($1=.6730 Pound)

To read the Reuters Hedge Fund Blog click on blogs.reuters.com/hedgehub; for the Global Investing Blog click here

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