That’s what Aberdeen Asset Management said this week about its incredibly successful emerging market equities funds, in particular its $15.5bn (£9.6bn) Luxembourg-domiciled Global Emerging Markets Equity Fund and the UK-listed £3.7bn Emerging Markets Fund.
I’ve written about the growth of these funds before, particularly after Aberdeen wrote to investors in February last year to outline its concerns while asking larger investors – including discount brokers Hargreaves Lansdown and Chelsea Financial Services in the UK – to stop promoting its global emerging markets (GEM) vehicles.
Net flows in the GEM strategy were £1.7bn ($2.7bn) in the three months to end 2012, up from £1.3bn in the previous quarter, and above the firm’s stated long-term target of $2bn per annum.
Time to be decisive
Aberdeen’s subtle approach to limiting inflows has not worked, with total GEM assets now standing at a staggering $36bn.
It’s time the funds were closed to new investment indefinitely and Devan Kaloo and his team were left to run the money without compromise to their strategy.
A spokesman for the firm said it is looking at “a range of measures” to counter the problem, though barring a split of the funds into new entities (a la Fidelity Special Situations in 2006), it’s hard to think what else it could do except halt inflows entirely.
Some investors may see Hugh Young’s Asia Pacific funds as an alternative choice, though his strategy has also proved incredibly popular, taking in net flows of £1.4bn in Q4 2012, up from £719m in Q3.
Nevertheless, Aberdeen says it has no concerns about size and liquidity here given that Young invests in several large developed markets, including Australia, Hong Kong and Singapore.
So yes, it is encouraging that Aberdeen is being honest about bringing in too much money (other groups may be less inclined to share this information publically), but it also has a duty to investors to address the problem, pronto.
