Two of the UK’s largest asset managers have unveiled job cuts as the sector battles continued pressure on its profitability and client outflows.
Abrdn, which was demoted from the FTSE 100 last year, plans to axe 500 jobs in a push to lift profits and revive a languishing share price.
The job losses — about 10 per cent of Abrdn’s 5,000-strong workforce — were the centrepiece of a £150mn cost-saving programme set out on Wednesday, as the company revealed outflows from its funds had accelerated in the second half of last year.
Edinburgh-based Baillie Gifford, which employs about 1,800 people, is also making “dozens” of lay-offs and closing four fixed-income funds that collectively have less than £50mn in client assets, according to a person close to the firm. The move was first reported by Bloomberg. It will focus its fixed-income business exclusively on the UK.
“It is not pretty out there — fund managers are caught between net redemptions and a fee squeeze, hence redundancies and mergers,” said Ben Yearsley, director at consultancy Fairview Investing. “There are too many average and inadequate fund managers out there that need a shake-up.”
Abrdn and Baillie Gifford join money managers BlackRock, Charles Schwab, Invesco and Manulife in announcing job cuts and restructurings in recent months. The pressure to maintain profit margins while also investing in technology and growing areas to win new customers is forcing groups to take action. This is set to drive more mergers and acquisitions in the sector, analysts said.
Assets at Baillie Gifford — known for its early bets on tech companies such as Amazon and Tesla — dropped by a third in 2022 to £223bn, as the rise of growth stocks that had propelled its performance over the past decade was curbed by higher interest rates. A rebound in performance in the fourth quarter in 2023 helped it end the year slightly higher, with £226bn in assets.
Baillie Gifford said: “As part of our regular business planning, we consider how to reduce our expenditure. However, our partnership structure ensures we can continue to invest in growing areas of the business while pursuing excellent long-term returns for our clients.”
Meanwhile, since his appointment as Abrdn chief executive in 2020, Stephen Bird has sought to overhaul its funds in an attempt to staunch outflows from cautious clients amid market uncertainty. More than 250 of its investment funds have been closed, restructured or merged since the former Citigroup executive took the top job.
“The share price is not where we want it . . . it is incumbent on us to adjust the business,” Bird said on Wednesday morning.
Shares in the company, which was formed by the 2017 merger of Standard Life and Aberdeen Asset Management, were trading up about 1.5 per cent by Wednesday afternoon.
In a statement, Abrdn said that “after a root and branch review, we are now re-engineering and simplifying our business model to remove at least £150mn of costs — mostly from group functions and support services”.
In an email to employees on Wednesday, seen by the Financial Times, Bird said the changes would remove management layers, increase efficiency and reduce cost. “We need to do more, across the group . . . the way forward is not easy,” he said.
The company will still pay bonuses for some staff this year to recognise what Bird described as “performing colleagues”.
Investors pulled £9.5bn from Abrdn’s funds in the six months to the end of December, rising to £12.4bn when including the money pulled from funds but remaining on Abrdn’s investment platform in cash. This was more than double the £4.4bn investors withdrew in the first half. The group pinned some of the blame on geopolitical uncertainty.
Bird said: “The new transformation programme . . . when completed, will deliver a step change in our cost to income ratio.”
On Tuesday, Moody’s downgraded Abrdn’s long-term issuer rating by one notch from A3 to Baa1 because of “idiosyncratic weaknesses” in its credit profile that have been exacerbated by industry-wide challenges. Abrdn still has an investment-grade rating.
David McCann, analyst at Numis, said: “[This is] a step in the right direction, but more needs to be done, not just in terms of better aligning the costs with revenues, but more broadly group strategy and shareholder value maximisation and a credible plan to return to growth (or at least reduce the pace of decline).”