Five years ago former Aberdeen chief executive Stephen Bird made what would prove to be a disastrous choice when he chose to rebrand the investment manager abrdn.
The decision was widely mocked across the Square Mile – including earning the odd jibe in these pages. Some have called Bird’s decision the beginning of his downfall (the firm has since rediscovered the importance of vowels).
Bird was put at the helm in 2020 to sort out the messy merger of investment houses Standard Life and Aberdeen. But his tenure saw outflows widen and a painful ejection from the FTSE 100 three years ago. He stepped down a year later.
But Bird’s other big bet proved to be a real feather in his cap. He purchased DIY investment platform Interactive Investor for £1.5bn in 2022.
At the time, this valued the platform at roughly 40 times its profit and almost a fifth of shareholders were against the acquisition.
Last year Bird’s successor, chief executive Jason Windsor conceded that it was a “high price” to pay.
But unlike the botched rebrand, the site has since defied early doubts and has been hailed as the driver of Aberdeen’s resurgence. The group returned from its mid-market exile last year and shares have risen 22.8 per cent over the past 12 months.
Interactive Investor performance
“The acquisition of Interactive Investor, at the time everyone was talking about how overpriced it was,” said Nick Sherrard, founder and managing director of Label Sessions.
“But actually it’s been a real goldmine…a real stroke of genius.”
Since its integration into Aberdeen, Interactive Investor has seen steady inflows and has hit multiple record highs.
The platform generated net inflows of £6.8bn in the first half of the year and grew its customer base by 14 per cent to 525,000.
The firm has also consistently outpaced competitors, luring over customers through monthly flat fees and wide product offerings, from both established providers and new fintechs.
But other channels are failing to match the DIY’s platform success, raising concerns its growth masks problems elsewhere. Some City figures question whether Interactive Investor alone can prop up the group’s comeback.
Segment woes
Issues in Aberdeen’s adviser and wealth arms replicate those harming the wider traditional fund management business.
The firm’s investment arm dominates the group’s asset base. Last month it reported £389bn assets under management (AUM). In comparison, Interactive Investor had just £108bn AUM.
Total assets under management are yet to return to the £654bn levels seen at the time of the 2017 tie-up between Standard Life and Aberdeen. The group’s share price has also plummeted 40 per cent since the deal was completed.
The adviser arm is also a year behind its target for £1bn of net inflows, and analysts have coined it as the hardest to reset.
In a research note, Deutsche Bank said a “catalyst” was needed to unlock Aberdeen’s full value, because issues with the adviser arm were acting as “drag on the wider group”.
But Interactive Investor is responsible for offsetting large outflows in other channels. The investment arm suffered outflows of £5.6bn in the first half of the year, while its wealth channel outflows widened from £0.9bn to £1.3bn.
Many have cautioned against allowing the group to lean heavier on Interactive Investor more to generate inflows, arguing it will not solve issues elsewhere in the business.
Sherrard said: “The big danger for them will be that they try and make it solve all the problems in the rest of the group rather than grow it as a business in its own right.
“You end up holding Interactive Investor back.”
Breaking up?
Aberdeen now faces questions over whether it should be broken up, allowing Interactive Investor to perform without the weight of other struggling channels around its neck and boost shareholder value.
Away from struggles in asset management, other areas of the business are gaining traction. In December, it took on the £1.2bn pension fund of bus operator Stagecoach.
The firm also intervened in the longstanding battle between Saba Capital and the investment trust industry. It agreed to take over the management of the Herald investment trust in a bid to stop it falling victim to the US hedge fund.
But until other arms of the business can find their footing, Interactive Investor looks set to be a shining jewel in a sea of dull gems for this decades-long darling of the London markets.
