How Abrdn has lost the battle to get investors’ money

Abrdn struggles to show that everything is on track seven years after the merger of £11bn.

After Stephen Bird informed a group angry money managers their bonuses wouldn’t be distributed “like peanutbutter”, the newly-in charge company decided that it would also cut back on vowels.

Standard Life Aberdeen was created by a merger of Aberdeen Asset Management with Standard Life in 2017 for a total of £11bn. is now Abrdn.

Bird, an ex-Citigroup banker whom former colleagues praise but who also question his readiness to make such a change, was the self-styled reset guy.

Not just bonuses and vowels have been reduced. Abrdn was kicked out of the FTSE 100 after its share price plummeted. It now plans to cut £150m from costs. This means cutting 500 jobs, reducing overheads and drawing up new contracts. It will also replace some of the Bloomberg terminals that cost £24,000 a year.

Friends of Sir Douglas Flint who is the chairman of the company and has a background in banking believe that both he, as well as Bird, have had a particularly bad time in tackling a job which was going to be tough. Analysts say that fund managers are losing patience, and the company’s fund managers have also lost their patience.

In recent days, it was revealed that US investment company Harris Associates, which is a prominent shareholder in Abrdn has sold its stake because of a lack of confidence in the management. Abrdn sold its 50pc share in Virgin Money Investments on Wednesday, losing more than half of the investment value. Supporters will say that it’s just more bad luck.

The fund managers at Abrdn are much less generous. Investors who worked for the company say the merger was an “utter catastrophe” because the shares have fallen more than 70% since their high point in 2015 and the fund manager is continuing to record outflows.

Abrdn reported a loss before tax of £169m in the six-month period ending June 2023. The investor says that the staff is desperate to leave, and that they are convinced that their bosses are only trying to move away from traditional money managers roots.

Bird has focused on diversifying its company and increasing its consumer and technology focus. In 2022, it acquired Interactive Investor for £1.5bn . Stock-pickers believe that their status is gone.

Former employee: “Bonuses and travel are very limited. Management doesn’t seem to be interested in keeping good employees or focusing on investment performance,” he says. The former employee explains that this is in stark contrast to the lifestyles some people thought they were signing up for 20 years ago when bonuses were a “multiple of basic pay”.

Insiders deny that there are any problems within the company. They argue that everyone is cutting their costs, that bonuses are being more accurately based on performance, and that all fund managers are facing similar issues.

One executive insists, “There is no drama.”

Rae Maile is an analyst with Panmure Gordon who disagrees. Rae Maile, an analyst at Panmure Gordon, disagrees.

Maile says, “If only dear Mr Bramson could return to these shores.” Bird is now three years into its three-year turnaround, and it’s fair to ask whether the management still needs more change than the recent addition of Jason Windsor as chief financial officer.

Maile believes that current plans to cut costs barely scratch the surface. He argues there are arguments for a partial or complete breakup of the company. The real goal is to get the investment company back to a profit level that’s appropriate. This means further cost-cutting.

Rumours about a possible sale of Abrdn’s investment division were quickly dispelled last year.

Bird said on a recent earnings call that the board, management and myself were all in complete agreement on the group’s shape. He added that the speculation was outdated as it was tied to a 2022 strategic review.

He said, “In these reviews, we test each configuration to destruction.” “We have a commitment to the investment business. We can see a path that will restore its profitability.”

The drama has been a source of great enjoyment for competitors. A rival investment firm’s boss claims that Abrdn has been stuck in limbo due to its size.

He says that “pure asset management has become a game of scale.” “On the one hand, you have asset managers who manage billions of dollars of investments, like BlackRock. They benefit from economies-of-scale. You can also find absolute specialists who manage investments in niche fields like AI and nanotech.

The smaller and mid-sized asset management companies are the ones in trouble. They lack the economies of size to offset rising business costs. “If you are caught in no-man’s land it is only a question of time before your grave.”

The city analysts who are in agreement will continue to make their case for a major shake-up over the next few months, increasing pressure on Bird Flint. David McCann, Numis’s senior analyst, wrote in a Numis article last month that “the status quo must meaningfully change”, and “more radical actions such as the break-up of this group” are needed.

A second City analyst believes he will not be included on Abrdn’s Christmas card list for this year, as his opinion of the group is unlikely to make him popular among management. He jokes, “I will go to the results meeting. But I will not drink coffee or [eat] biscuits… just in case.”

Abrdn’s spokesman stated: “At Abrdn we are building a modern investment business. We have reshaped our company by combining wealth platforms and investment content to create a more diversified business that offers greater growth opportunities.

The investment management industry has been under pressure for years due to the combination of market conditions and changes in the industry. Recently, we announced a new programme of transformation to reduce our costs by £150m. This will improve profitability for Abrdn’s investment business.

Our remuneration policies are based on performance. We are very focused on keeping our best employees.”