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After hitting an all-time low back in April, Aberdeen (LSE: ABDN) shares have been on a tear. The mammoth dividend yield of 11.6% may have gone, but there aren’t many large, well-known stocks out there that continue to offer market-beating returns.
Improving numbers
The asset manager is due to report H1 results next week. Should the positive momentum seen in Q1 continue, then we could be on the cusp of a major recovery in its share price.
Last quarter, its direct-to-consumer offering, interactive investor (ii) continued its strong growth momentum. Total customer numbers were up to 450,000. This included 88,000 high-value SIPP accounts.
ii has been very successful in tapping into a growing trend – the increasing importance of private investors to markets. With the spread of online investment forums, YouTube, and the like, individual investors have more power to move markets than at any time in history.
Last quarter, during the tariff-induced selloff, ii saw record levels of engagement with an average of 24,000 trades per day on the platform. In the first half of April, it saw four of its highest trading days ever, as private investors swooped to buy stocks on the cheap.
Fund outflows
For all the success of ii, the reality is that a sustained recovery in Aberdeen’s share price will only occur if it can get a grip on falling assets under management.
Over the last few years, its Adviser business has simply haemorrhaged funds. The business is working hard to regain the trust of independent financial advisers, who recommend funds for their clients to buy.
In Q1, Adviser saw outflows of £600m. This was its ‘best’ performance over the past six quarters. A couple of years back, outflows were in the billions.
By 2026, it’s aiming for greater than 70% of its total funds to beat a benchmark index. I certainly expect it to achieve that with its bond funds, which regularly hit over 90%. But I’m less confident that equity-only funds will achieve that milestone.
It’s not just Aberdeen equity funds that struggle to beat a benchmark; this is an industry-wide problem. Over the last few years, unless a fund manager was invested in the Magnificent 7 stocks, it had zero chance of beating the S&P 500, the most tracked index.
Structural trends
If it can get its Adviser business back to profitability, then the opportunity is massive. Despite recent blunders, like the ill-fated ‘abrdn’ fiasco, I still view the asset manager as one of the most respected in the industry.
The UK wealth industry is growing. Over the next 25 years, over £5.5trn of wealth will be passed on by the baby boomers. In the more immediate future, over the next three years, the number of people retiring annually is estimated to be about 750,000.
Now more than ever people are beginning to wake up to the fact that the State Pension will no longer fund the kind of retirement they want. With deep expertise in long-term financial planning, Aberdeen looks well placed to provide innovative retirement solutions.
Over the last few months, I have been loading up on the stock at every available opportunity. I think my future self will thank me.
