Martin Gilbert has declared Edinburgh and London as the best locations to manage money in the world.
The veteran asset manager claimed that Brexit, despite complaints from other sectors, hasn't had an impact on the sector, stating that it was essentially “neutral”.
In an exclusive interview with Insider, the former Aberdeen Asset Management chief executive said: “London and Edinburgh are still the centre of things - they are the two best locations to manage money in the world because they sit in the middle of the time zones.
“At the moment fund managers want to be located in London; I think that will continue.”
However, Gilbert lamented the “demise of the financial service sector in Edinburgh since the financial crisis”, adding that he would love to see “Scotland become a huge financial centre”.
Educated in Aberdeen, he is bullish about the prospects for the transition to renewable energy that is centered around the North East of Scotland, although he admits that the price of oil has helped the nation's economy “enormously”.
Gilbert added that he also believes there is a correction in the stock market prices to come, due to global markets becoming “awash in liquidity”.
He now divides most of this time between chairmanships at challenger bank Revolut and investment management consolidator AssetCo, the latter of which will be concentrating on Edinburgh and London, with plans in the “medium to long term” to expand into Asia.
AssetCo’s strategy is to target fund managers which are good at managing money, but for some reason stuck with growth prospects, with Gilbert noting Saracen Fund Managers - acquired last May for £2.75m - which had got stuck at a size where it was "losing momentum".
The biggest deal to date came late last month, with a long-mooted acquisition of River and Mercantile for £98m.
“We saw a very undervalued situation at River, two and two was making two, so if we separated the businesses two and two might make four, which is what it has benn done - we sold the solutions business to Schroders for 230m cash, so it’s sitting there stuffed full of cash at the moment.”
Gilbert said he wished that all deals were as “easy to see value” in, as it made a great profit out of shareholdings, which he believes AssetCo can grow “significantly”.
He continued: “We’ve always been good at doing a lot of small deals, but River and Mercantile is a bit different, as it’s about the same size as us, and it’s a public company, which adds complications.
“It’s not like a private company deal, but hopefully once we get River done we can go on and do a few more small deals this year.”
The move into more of a portfolio career began when Gilbert took the decision to quit his position as co-chief executive of the merged Standard Life Aberdeen in 2019, after more than 30 years at the helm.
Since then, his co-chief Keith Skeoch stepped down in 2020, replaced by Stephen Bird, who has overseen a streamlining of the group, with a controversial renaming to abrdn and a recent spree of acquisitions, culminating in the deal for platform Interactive Investor for £1.49bn in December.
“I actually think the Interactive deal is a good deal,” commented Gilbert. “The thing about abrdn is it's got, if not the strongest balance sheet in the fund management sector, it's got one of the strongest globally.
“It’s got the firepower to make these acquisitions - I think it's a great sector to be in - Stephen knows what he is doing in the consumer space and direct space, so it makes sense.”
As for the mega-merger that brought Standard Life and Aberdeen Asset Management together in 2017, Gilbert has no regrets, but concedes that he might structure things differently if he was able to do it all again.
“I would try and get the technology sorted faster than we achieved - I think Stephen will create a world-class business - but that's probably taken a bit longer than we would have liked.
“Perhaps the market hasn’t really understood how strong the business is, but I think it will go from strength to strength.”
Gilbert does, however, still hold regrets about the split-capital trust scandal, which Aberdeen Asset Management was heavily involved in. The funds were designed to be low-risk, but turned out to be anything but, with up to 50,000 investors losing significant sums between 2002 and 2004. The firm eventually offered £125m in compensation, with its share price plummeting and Gilbert hauled in front of the Treasury Select Committee.
“We learned from it, we recovered from it and built a massive business after that, but it was a really really tough time.
“Obviously I regret it, because you never like losing clients' money, but as long as you learn your lessons and don’t make the same mistakes again then you can take something from it.
“I think it helped us during the financial crisis actually, because we didn’t invest in CDOs [credit default swaps] and all the instruments that were being used then with a lot of gearing.”
Some have described cryptocurrencies as another scandal looming for investors, but Gilbert reckons they have become a legitimate asset class which can no longer be ignored by the mainstream.
“I think the issue is that the people who buy and sell crypto don’t understand the asset class - I know people relate it to gold, but gold with a limited supply.
“I would always say if you’re going to invest in something then make sure you know what you’re doing,” he warned, adding: “I would say if you’re in the retail or direct-to-consumer business, you do need to be looking at crypto, just because the number of people who own crypto now; we are speaking about huge numbers of the UK.”
The chat with Gilbert concluded with a challenge to pick three favourite deals out of the 60-odd acquisitions throughout his career.
Coming top was was the purchase of Sentinel Asset Management for £5m, which saw Hugh Young join the firm, and went on to make Aberdeen Asset Management around $100m a year during its peak, with Gilbert labelling it a “spectacular deal”.
His second favourite was the acquisition of Edinburgh Fund Managers in 2004, during the “depths of the split cap crisis”. He revealed it was one of the hardest he has ever done, but that the deal saved Aberdeen Asset Management, with many of its clients still being with abrdn today.
Gilbert's final favourite was the acquisition of Deutsche Asset Management, which he remembers “vividly” because it tripled the size of Aberdeen Asset Management, turning it from a boutique into a global asset manager, in what he called a “phenomenal deal”.
He recalls: “The reason I remember the date so vividly is because we did the deal at 7am and there were the underground bombs in London at 10.
“A major lesson I learned from that is don’t delay, get the deal done - the lawyers were saying to me at 6.50am we need another day and I told them I don’t care if you sign or not, we are announcing it at 7am - if we hadn’t announced it then it would have never got done because of the terrorist attacks.”
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