Aberdeen intends to become incorporated as a wholly foreign-owned enterprise (WFOE), whereby foreign parties can incorporate a limited liability company without the involvement of a Chinese mainland investor, according to industry reports.
The deal, said to be part of a trade mission led by Chancellor George Osborne and business secretary Sajid Javid, will see Aberdeen travel alongside other financial services organisations including Barclays, HSBC and Standard Life.
Aberdeen is expected to open an office in Shanghai, building on the group’s existing presence in the region. The proximity should give the fund manager closer access and allow easier research of companies listed on the mainland equity markets.
Aberdeen is also one of the very few global players that has an operation in Thailand.
Long underweight China
Writing in the The Telegraph last week – prior to early reports, chief executive Martin Gilbert said the recent declines suffered by Chinese investors had “vindicated” Aberdeen’s long-held house views on the country, and those of head of Asian equities Hugh Young.
“We have been underweight in China for as long as I can remember, even though it sometimes in the short term affected our funds’ performance against their benchmarks.”
He gives three main reasons: transparency, corporate governance and valuations, the latter often fuelled by “leverage and speculation rather than fundamentals”.
Largely attributed to the group’s emerging markets exposure, Aberdeen’s share price has tumbled since July. At the time of writing (21 September) shares were valued at 324.30p.
Gilbert added in his Telegraph article: “So we have chosen to gain exposure to the Chinese economy through other routes, mainly by investing in Asian and international businesses with significant interests in China. And while none of them have been immune from the sell-off in emerging market equities, we feel our holdings are on far firmer foundations than others.
“I should stress at this point that Aberdeen is extremely positive about China in the medium to long-term. We believe its growth rate will continue to outstrip its Western counterparts and it will evolve from being essentially an offshore manufacturing centre into a truly modern economy.”
Currently with £307.3bn under management, Aberdeen has been busy these past few months, demonstrating an appetite for diversification.
In May it bought US private equity and venture capital business Flag Capital Management, August saw Gilbert add US hedge fund group Arden Asset Management to his empire while also launching an alternative strategies vehicle, and earlier this month, it announced plans to dip its toe in the platform market with the acquisition of Parmenion Capital Partners.
Aberdeen declined to comment.
