LONDON (Thomson IM) – Fund manager Aberdeen Asset Management is eyeing opportunities to snap up funds of hedge funds and funds of private equity funds at bargain-basement prices, its chief executive said on Thursday.
Martin Gilbert said that with opportunities in these areas ‘now pretty strong’ as the global financial crisis causes upheaval in the industry, the fund manager could look at making small acquisitions.
‘Funds of hedge funds (FOHFs) and funds of private equity are a lot cheaper than they were six months ago, and they are significantly cheaper than they were two years ago.
‘FOHFs, for example, were selling for 15 percent of assets under management two years ago. They are now down to very, very manageable levels, very attractive levels, and a lot of them are subscale, so I think there is an opportunity to consolidate in that area,’ Gilbert told Reuters in an interview.
Predominantly a long-only manager, Aberdeen currently has only modest exposure to hedge funds and private equity. Gilbert played down the chance of an imminent deal, but the firm is looking to beef up its alternative investments business — which is currently focused on real estate — following demand from its institutional clients.
Gilbert said Aberdeen would run a fund of hedge funds differently: ‘We wouldn’t take a performance fee, and we would run it on a reduced management fee.’
The hedge fund industry, which relies heavily on performance fees, has had an average return in the first 10 months of 2008 of minus 15.3 percent, according to the Hennessee Group.
‘There is an amazing number of people talking to each other in the funds business. We certainly feel that we are among the acquirers rather than a business going to be acquired during the market downturn,’ he said.
However, he denied market rumours of a potential takeover of New Star Asset Management (NSAM.L: Quote, Profile, Research), the London-based fund firm run by John Duffield.
‘These rumours are not true. It’s unlikely that a company like New Star would fit in our strategy for strengthening our business through bolt-on acquisitions,’ Gilbert said.
Gilbert said the fund manager was continuing with its cost cutting, which will result in further job losses.
‘There will be some, but we are looking at all costs,’ he said.
As part of the cost-savings exercise, Gilbert said he had implemented a freeze on hiring: ‘The key thing is to stop recruitment, but we have not stopped recruiting graduates.’
In its interim management statement in July this year, the fund manager said it had earmarked 57 million pounds of annualised cost savings, substantially higher than the 15 million pounds in cuts it had identified at its half-year results in May. Gilbert said he did not expect the final number to increase further.
‘We are looking at things like job duplication, where we can move jobs to Asia, all those sorts of things,’ he said.