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UK asset manager Abrdn has warned of a squeeze on margins as big clients continue to shift their funds from active managers to cheaper passive strategies.
The London-listed group on Tuesday reported a pre-tax loss for the second consecutive year, although the £6mn loss reported for 2023 was well below the £612mn for 2022, when it took several charges.
The company last month announced a plan to cut £150mn of costs by the end of next year, as chief executive Stephen Bird stepped up his efforts to restore the group’s fortunes.
In a statement accompanying its full-year results, the company said: “While market conditions, structural and cyclical, remain challenging for active asset managers we continue to expect headwinds arising from changing client demand and preferences.”
Abrdn pointed in particular to clients in the insurance sector, where it expected “the asset rotation from active equity and fixed income strategies to passive quantitative strategies to continue into 2024”, resulting in a hit to margins.
Formed through the merger of Standard Life and Aberdeen Asset Management in 2017, Abrdn has spent much of the period since beset by outflows and a declining share price. The stock has fallen 50 per cent since the start of 2020.
After a more than two-decade career with Citigroup, Bird became chief executive in 2020, promising to mastermind a revival. More than 250 of Abrdn’s investment funds have since been closed, restructured or merged in a bid to improve the performance of an asset manager competing with much larger global competitors and much smaller specialist boutiques.
As part of an effort to strip costs from the business, Bird said he was targeting a cost to income ratio of 70 per cent. The company said on Tuesday that the ratio was 82 per cent last year, unchanged from 2022.
Adjusted operating profits slipped from £263mn in 2022 to £249mn last year.
Bird has also turned to acquisitions to reignite growth, most notably the £1.5bn purchase of Interactive Investor in 2021.
