Abrdn warns of margin squeeze as clients shift to passive

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UK asset manager Abrdn delivered better than expected full-year results but warned that margins would remain under pressure as big clients continued to shift their funds from active managers to cheaper passive strategies.

The London-listed group on Tuesday reported adjusted operating profits of £249mn for last year, ahead of forecasts, but down from £263mn in 2022. The result was enough to drive Abrdn shares up almost 7 per cent in early trading, with analysts at Numis pointing to a “modest beat”.

Formed through the merger of Standard Life and Aberdeen Asset Management in 2017, Abrdn has spent much of the period since beset by outflows and a declining share price. The stock has fallen almost 50 per cent since the start of 2020.

The company last month announced a plan to cut £150mn of costs by the end of next year, as chief executive Stephen Bird stepped up his efforts to restore the group’s fortunes.

After a more than two-decade career with Citigroup, Bird became chief executive in 2020, promising to mastermind a revival. More than 250 of Abrdn’s investment funds have since been closed, restructured or merged in a bid to improve the performance of an asset manager competing with much larger global competitors and much smaller specialist boutiques.

In a statement accompanying its full-year results, the company said: “While market conditions, structural and cyclical, remain challenging for active asset managers we continue to expect headwinds arising from changing client demand and preferences.”

Abrdn pointed in particular to clients in the insurance sector, where it expected “the asset rotation from active equity and fixed income strategies to passive quantitative strategies to continue into 2024”, resulting in a hit to margins.

As part of an effort to strip costs from the business, Bird had previously said he was targeting a…