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Aberdeen Scoops Up $7B Equity Team From Nationwide


Aberdeen Asset Management of Aberdeen, Scotland, may not be a household name, but as of today, Oct., 1, the firm's Philadelphia-based U.S. subsidiary has a fresh $7 billion chunk of 30 sub-advised mutual funds and variable annuity trust assets from Nationwide Financial of Columbus, Ohio, to call its own.

That, added to its own existing $3 billion investment management business, dovetails nicely with Aberdeen's plans to grow its presence in the U.S. market carefully and sure-footedly. Financial details of this transaction were not disclosed.

Martin Gilbert, CEO of Aberdeen's parent company, said his firm was making the acquisition because the Nationwide funds have an excellent track record and will expand his firm's U.S. equity research capabilities. While the proportion of assets held in Aberdeeen portfolios by U.S. investors is currently 22.5%, Gilbert said he intends to grow that significantly. "It's a massive market. You just cannot believe how big it is-wealthy private families, foundations, unions," he said in a recent interview.

As to why Nationwide Fund Advisors decided to sell off the $7 billion portion of its Nationwide Funds Group, the firm wants to divest itself of its proprietarily managed mutual fund business and tap the "best of America" asset managers through an open architecture plan to utilize outside sub-advisers.

That $7 billion slice had previously been part of the larger Gartmore Global Investments company that Nationwide originally acquired for $1.6 billion in 2000 from Royal Bank of Scotland, beating out National Westminster Bank in its bid. In 2004 Nationwide sold off the London-based arm of Gartmore, Gartmore Investment Management, to San Francisco-based private equity firm Hellman & Friedman Advisors, but kept Gartmore's domestic investment unit, temporarily renaming it NWD Investment Management in 2006.

The expanding "best of America" sub-advisory theme hails back to Nationwide's creation of its "Best of America" annuity several years ago that accessed top talented money managers on a sub-advised basis.

This transaction with Aberdeen, however, allows Nationwide to remain as the official investment advisor while Aberdeen becomes the official sub-adviser to 21 Nationwide mutual funds and nine variable annuity insurance trust funds. Nationwide's fund unit currently sports more than 20 sub-advisers across $30 billion in assets under management.

For Nationwide, the deal makes sense because it wants all investment management functions handled externally through sub-advisory relationships that offer more flexibility and allow the firm to change, add or subtract sub-advisors as needed, said John Grady, president and CEO of Nationwide Funds.

For Aberdeen, this arrangement gives the company an immediate equity team that the firm will tap as it seeks to grow its asset management business here in the U.S. "We can leverage this resource. We are hoping to grow our business over time,' said Gary Bartlett, chief executive of Aberdeen in the U.S., who readily admits that his firm won't be a household name anytime soon.

Aberdeen is best known for its fixed-income prowess and recently acquired a small fixed-income unit from Deutsche Asset Management. It has no plans to make any big acquisitions, but smaller bolt-on acquisitions, like this equity unit from Nationwide makes sense as the firm also focuses on organic growth and looks to grow distribution and core capabilities, Bartlett said.

Right now Aberdeen manages three closed-end funds, the Aberdeen Australia Equity Fund, Aberdeen Asia Pacific Income Fund and the Aberdeen Global Income Fund, It also sub-advises two funds with First Trust, and in May launched its first U.S. open-end institutional mutual fund, the Aberdeen Emerging Markets Fund. Other funds are planned.

For now, Aberdeen is investing its energies in keeping clients happy as a means to bolstering business. "We try to keep investment teams focused on generating alpha [for clients]," said Bartlett. "If we can do that on a continued basis, we will grow."

The arrangement includes Aberdeen taking over Nationwide's offices in West Conshohocken, Pa., as well as adopting to its payroll about 45 people who work in that office and were formerly Nationwide staffers. Those individuals include a full staff, from equity investment portfolio managers, analysts and traders. Shahreza Yusof, who joined Aberdeen in 1994, will head the operation after the two teams are merged.

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