Aberdeen expands in United States with acquisition of £15 billion in funds

Aberdeen Group is strengthening its position in the United States closed end investment fund market with the acquisition of mandates to manage nine bond funds holding assets valued at £15 billion. The asset management firm intends to merge these funds into two larger entities, using this base to support further acquisitions and expansion efforts in the region.

The seller, MFS of Boston, has negotiated a reduction in some management fees by approximately ten per cent. Despite this, Aberdeen expects to generate annual management income of around £10 million from the new funds. The company, aiming to become a prominent influence in closed end funds, has faced recent market challenges such as widening discounts to net asset values.

Globally, Aberdeen manages a total of £214 billion in closed end funds, positioning it as the fifth largest player in the sector. In the United Kingdom its portfolio includes the £39 billion Tritax Big Box warehouses fund and the £2 billion Murray International fund, which is a constituent of the FTSE 250.

Within the new arrangement, Aberdeen will combine its existing Aberdeen Municipal Bond closed end fund with four of the new mandates to establish a £1 billion fund. The remaining five MFS taxable fixed income funds will form a single multi sector entity holding £14 billion, spanning assets such as emerging market debt, high yield bonds and private debt. This consolidation aims to deliver greater economies of scale and improved liquidity for investors, giving Aberdeen the breadth required to compete with sector leader Pimco’s £105 billion Dynamic Income fund.

Both merged entities are expected to serve as platforms for additional consolidation in the closed end fund market. Aberdeen’s strategy is to deliver larger funds that are more cost effective and attractive to investors. The transactions await the approval of shareholders in all relevant funds.

Aberdeen has a history of active consolidation, having acquired nine closed end funds in the United States over the past twenty five years. The group, which recently returned to its original name after abandoning the Abrdn branding in March, currently manages £542 billion in client assets. Its portfolio includes Interactive Investor, a fast growing platform popular among private investors.

Shares in Aberdeen closed marginally lower at 194¾p, a decrease of 08 per cent. The proposed acquisitions follow closely on Aberdeen’s purchase of the Stagecoach pension scheme, underlining its drive for growth and scale across key investment sectors.