Hedge funds stop shorting Aberdeen Asset Management

Hedge funds have stopped betting against Aberdeen Asset Management for the first time in four years, with analysts predicting an end to dramatic share price falls for the Scottish fund house.

Aberdeen’s share price nearly halved since it hit a high of 507p in April 2015. It was targeted by hedge fund managers when investors began to worry about emerging market valuations four years ago.

The FTSE 250 fund house, which specialises in emerging market and Asian equities, reported its 15th consecutive quarter of net outflows earlier this month, bringing total withdrawals for the company to more than £100bn since 2013.

AQR and Odey Asset Management, two of the world’s largest hedge fund companies, are among the big asset managers to have removed their longstanding short positions against Aberdeen in recent months.

Analysts said the company’s share price is unlikely to fall much further, reducing the incentive to bet against Aberdeen.

They added that Martin Gilbert, chief executive of the fund house, indicated last year that Aberdeen had received interest from potential buyers, and any M&A bid would be expected to boost its share price.

Paul McGinnis, an analyst at Shore Capital, the brokerage, said: “The shares [may] have now fallen to a level where hedge funds don’t see sufficient downside to maintain the short.

“The fact that Martin Gilbert has also talked about Aberdeen being an attractive asset that people want to buy perhaps makes hedge funds nervous about being caught on the wrong side of a bid.”

But he added that if Aberdeen is forced to cut its dividend — a prospect that was raised by the company last year — then its share price could fall below 240p.

RBC upgraded Aberdeen earlier this month after deciding the risks facing the UK’s second-largest listed asset manager were “well known by the market and more than reflected in the share price”.

In a research note, the Canadian bank said Aberdeen was more likely to receive a takeover offer due to its lower share price and the weak pound, which makes the company more affordable for foreign buyers.

“[Aberdeen has an] oversold share price, a reasonable valuation, a high dividend yield, stabilising revenue margin, well controlled cost base, and the real possibility of M&A,” the bank said.

Aberdeen, AQR and Odey Asset Management declined to comment.