A ‘master of the universe’ faces his toughest test

A ‘master of the universe’ faces his toughest test
Martin Gilbert presents the Aberdeen Asset Management Scottish Open to Rickie Fowler in 2015. He shares a passion for golf with friend Donald Trump. (Getty Images)
Updated 02 March 2018

A ‘master of the universe’ faces his toughest test

A ‘master of the universe’ faces his toughest test

As a blizzard swirled and the temperature plummeted in Davos last month, a Scottish piper played a chilling lament outside the traditional Aberdeen Cafe, one of the focal points of the Swiss town’s glitzy power gathering.
Inside, Martin Gilbert was extending the hand of hospitality to some of the glitterati who attend the World Economic Forum annual meeting. The 62-year-old Scottish financier welcomed new guests and back-slapped old ones with customary bonhomie, distributing refreshments to keep the Alpine cold at bay.
“Like it or loathe it, Davos is the only place where that many influential policymakers, political leaders and business people are in one place at one time,” said Gilbert.
The financier had done the same thing many times before in a 35-year business career that had seen him create one of the leading investment firms in the world, making himself wealthy enough to qualify as one of the Davos “masters of the universe.”
He counts US President Donald Trump, who also attended the event, as a friend due to their mutual interest in golf in Scotland.
But this time at Davos there were some important differences. For one, the sign outside the cafe now read Standard Life Aberdeen (SLA), in recognition of the merger last year between Aberdeen Asset Management and Standard Life that pooled assets under management of $870 billion.
Inside, though he showed no signs of it, Gilbert was embroiled in one of the biggest challenges he had faced in a life that had taken him from Malaysia, where he was born to expat parents, back to the family home in Aberdeen and then on to the financial hubs of London and Singapore, and most recently to Abu Dhabi in the UAE.
He was staring at the loss of $153 billion of assets under management, a threat that could signal a tipping point for the newly merged business.
Backtrack just under a year, when Gilbert had announced a tie-up with Standard Life and a move to co-chief executive status alongside Standard’s Keith Skeoch. There had been rumors that Gilbert might sell Aberdeen for some time, but it was always likely he would be the consolidator, as much as the target of consolidation.
The merger, alongside his continued involvement at the top, meant that industry logic could be presented as the reason for the deal. In a recent interview with Arab News, he said: “The cornerstone of the deal was the extent to which Aberdeen and Standard Life complemented each other, and by putting them together the combined business will continue to grow. They complemented each other in two key respects: a minimal overlap in investment capabilities, and significantly different distribution strengths, resulting in a business which is highly diversified by asset class, clients and revenues.
“The increased breadth of investment capability will provide clients with more choice. Various pension funds, insurers and financial institutions are increasingly looking to interact with a smaller number of fund managers from whom they buy a wider range of strategies. Many of the US fund management giants have been very successful at marketing multiple investment strategies to clients.”
Nonetheless, there was also the argument that something had to be done to halt the decline in Aberdeen’s business, with billions of dollars withdrawn from Aberdeen’s management.
“Of course, the asset management industry is also facing various challenges, including the rise of passive investing, downward pressure on fees and increased regulatory pressures. But as a combined business we are much stronger to face these challenges head on and to capitalize on opportunities created,” said Gilbert.
Those outflows continued even after the merger — with more than $30 billion withdrawn in 2017 — but Gilbert was sanguine about overall trends and optimistic about the future.
“The outflows the combined business experienced last year were in line with our expectations given the asset classes affected, and the structural outflows from our lower margin mature books. Importantly, though, the momentum in the business was good, with around $83 billion of gross inflows during the first nine months of the year.
“We continued to innovate, launching new funds with strong backing from clients and winning new mandates across a wide range of investment strategies. Standard Life, the pensions and savings business, had record flows during the first nine months of the year, demonstrating further our strength and diversity,” he said.
But what the new set-up did not need in its formative period was a big withdrawal of funds. As Gilbert extended his hospitality at Davos this year, that is exactly what he was facing.
One of Aberdeen’s biggest chunks of business at the time of the merger was the $153 billion it managed for the Scottish Widows insurance business of Lloyds Banking Group. The potential problem — highlighted as a risk in the course of the merger process — was that Aberdeen had a big competitor to the Widows operation, in the form of Standard Life’s own insurance business.
A couple of weeks after Gilbert had shaken the snow off his shoes, a thunderbolt struck. Lloyds announced that, after a review, it was going to terminate its Widows deal with Standard Life Aberdeen, citing competition issues. He faced the prospect of losing his biggest client — after a year’s notice that Lloyds was obliged to give — calling into question the logic of the merger and the strategic direction it was taking. The company’s London quoted shares bombed.
But Gilbert, the consummate deal-maker, had one card up his sleeve, and he played it last week. In a $4.5 billion deal, he and Keoch sold the Standard Life insurance business to Phoenix Group, the UK insurer in which it will also get a 20 percent stake, potentially ending the competition issue with Lloyds and leaving it in a position to retain the business it thought it had lost.
“The deal represents a logical next step in Standard Life Aberdeen’s journey to build a world-class investment company,” he told Arab News.
“It is also a great opportunity for wider collaboration as the asset manager of choice for Phoenix, which sees further significant consolidation opportunities. With the foundations of a world-class investment company in place, we look forward to capitalizing on the opportunities that we see ahead of us while continuing to deliver for our shareholders,” he said.
But will it be enough to get the Lloyds business back? That is not certain.
“In terms of Lloyds, we still have a good relationship with them; we will continue to manage money for them at least for another 12 months, if not longer, and will aim to deliver the strong performance and good client service they highlighted we provide. Whether the Phoenix transaction will influence Lloyds’ decision — they highlighted competition as the reason for carrying out their review — we will need to wait and see,” Gilbert said.
If the jury is still out on the final shape of the asset portfolio, it seems the Middle East will remain a high-priority destination for SLA. Gilbert has always been an enthusiast for emerging markets, opening an Aberdeen office in Singapore in 1992, and, in 2016, taking his first step in the Arabian Gulf with an office in the Abu Dhabi Global Market (ADGM) free zone in the UAE capital.
“We’re happy with how the business is progressing. We’ve got a long track record in opening international offices and believe that it’s important to have resources on the ground where our clients are. So opening a local presence in the region, and in Abu Dhabi, in particular, has been vindicated. We are seeing traction across a number of strategies, particularly emerging market debt and real estate,” he said.
When the ADGM office opened, Gilbert said that the low oil price was not a deterrent to doing business in the region, and his macro-outlook remains unchanged. “The global economy seems to be doing fine, with only a handful of countries in recession. This should support oil prices which the Middle East is so reliant on. But the focus needs to remain on diversifying economies and spending on infrastructure,” he said.
Gilbert believes that Saudi Arabia is the “key market” in the region, but does not have any immediate plans to open there, happy to serve Saudi investors from the Abu Dhabi base they are already familiar with. But he is aware of the opportunities Saudi will present under the Vision 2030 strategy to transform the economy away from oil dependency.
“The reforms seem to be going in the right direction and will create many opportunities if the implementation is done right,” he said.
Does he believe the recent anti-corruption drive in the Kingdom will deter foreign investors from involvement in the economic transformation, as some critics have suggested? “For now, no. It all depends on implementation. If they [Saudi policymakers] get it right, it will help foreign direct investment. If they get it wrong, there will be a risk,” he said.
But, whatever the investment opportunities at home, he thinks that Gulf investors will still have an appetite for the kinds of investment products they have traditionally sought.
“For our Middle East clients, we think European real estate, in particular residential and logistics assets, represent good value. I also think there’s still tremendous value in emerging markets, particularly emerging market debt,” he said.
There is a new spirit abroad in the UK and global financial sector, with pressure rising on executives with big salaries and bonus schemes. It looks like Gilbert and Skeoch will have to concede some ground to shareholder critics on that front.
But it’s unilikely the cost-cutting will extend to the Aberdeen Cafe in Davos, which Gilbert can surely write off as a problem-solving profit center.


First Abu Dhabi Bank completes Bank Audi Egypt takeover

First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt. (Reuters/File Photo)
First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt. (Reuters/File Photo)
Updated 22 April 2021

First Abu Dhabi Bank completes Bank Audi Egypt takeover

First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt. (Reuters/File Photo)
  • Following the transfer of shares, the acquisition will make First Abu Dhabi Bank one of the largest international banks operating in Egypt

CAIRO: First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt, a subsidiary of the Lebanese Bank Audi Group, the bank announced on Thursday.

In a statement, the bank said that after the completion of the share transfer process, First Abu Dhabi Bank will begin merging the assets and operations of Bank Audi Egypt and First Abu Dhabi Bank — Egypt, with the merger process expected to be completed in 2022.

Following the transfer of shares, the acquisition will make First Abu Dhabi Bank one of the largest international banks operating in Egypt, with assets exceeding EGP 130 billion ($8.5 billion) after consolidating on Dec. 31, 2020.

“This step represents a strategic achievement that supports First Abu Dhabi Bank’s development aspirations at the international level and will accelerate the expansion of its business in one of the most important markets with high growth potential. This acquisition will play an essential role to enhance the volume and momentum of First Abu Dhabi Bank’s business in Egypt,” Hana Al-Rostamani, CEO of First Abu Dhabi Bank Group, said in a statement.

The banking services Bank Audi Egypt provides to individuals and companies through its wide network of branches will support the operations of First Abu Dhabi Bank in Egypt, which has operated in Egypt since 1975.

Mohamed Abbas Fayed has been appointed CEO of the combined entity. He joined First Abu Dhabi Bank in 2019 and was previously CEO and managing director of Bank Audi Egypt, which helped him gain extensive experience over three decades in the sector and in the Egyptian market.


Saudi Arabia sees 110% rise in flight searches in March

Saudi Arabia sees 110% rise in flight searches in March
Updated 22 April 2021

Saudi Arabia sees 110% rise in flight searches in March

Saudi Arabia sees 110% rise in flight searches in March
  • The Skyscanner data showed that domestic flights within Saudi Arabia were the most searched for last month

RIYADH: Saudi Arabia recorded a 110 percent month-on-month surge in people searching for flights in March, according to global online travel platform Skyscanner, as the Kingdom’s travelers get ready for international flights to reopen from May 17.
The Skyscanner data showed that domestic flights within Saudi Arabia were the most searched for last month, followed by international destinations in India, Pakistan, the Philippines and Egypt.
Flights were grounded in the Kingdom in March 2020. Domestic traffic resumed at the end of May 2020 and the Saudi General Authority of Civil Aviation (GACA) recently announced that international flights will resume by May 17, 2021.
In a bit to capitalize on this, Skyscanner has launched an Arabic language version of its platform on desktop and mobile web.
“We’re pleased to be able to offer travelers in the Middle East a far more relevant experience on desktop, allowing them to plan and book travel in their local language and currency,” Gavin Harris, director of strategic partnerships, Skyscanner, said in a press statement.
“Arabic is one of the 5th most spoken languages in the world and outbound travel from Saudi Arabia and the UAE accounts for a significant proportion of the total travel market,” he added.
In December, the “Global Holiday Intent” survey, conducted by YouGov on behalf of Reed Travel Exhibitions — organizer of the Arabian Travel Market (ATM) exhibition in Dubai — found that 46 percent of those surveyed in Saudi Arabia said that they intended to travel internationally once restrictions were lifted.
Additional research released this week by global travel services company Collinson found that more than four fifths of business travelers in Saudi Arabia had seen their job affected in some way by a lack of cross-border business travel, and about one third of survey respondents said that they felt unable to do their job effectively.


Evergrow signs $400m loan to restructure debts

Evergrow signs $400m loan to restructure debts
Updated 22 April 2021

Evergrow signs $400m loan to restructure debts

Evergrow signs $400m loan to restructure debts
  • $74 million of loan will finance construction of fertilizer plant in Sadat City
  • Mashreq Bank and National Bank of Egypt led 12-bank syndicate

RIYADH: Egyptian fertilizer company Evergrow has signed a $400 million loan agreement with a syndicate of 12 banks led by Mashreq Bank and the National Bank of Egypt (NBE), who acted as the facility arrangers, Asharq reported citing a joint statement on Wednesday.

The plan consists of $326 million that will be used to restructure previous debts Evergrow owes to the same banks, while the remaining $74 million will finance the construction of the third phase of the company’s fertilizer plant in Sadat City, slated for completion within nine months.

The financing is one of the largest dollar loans granted by banks to private sector companies in the Egyptian market in the field of potassium fertilizers during the past 10 years.

The deal is part of Evergrow’s financial reform program sponsored by the Central Bank of Egypt.

The new funds will help raise the annual production capacity of all the company’s products from 817,000 tons currently to 1.15 million tons annually, said Evergrow Chairman Mohamed El Kheshen.

Egypt’s Minister of Trade and Industry Neveen Gamea in March said that Egypt aims to increase its exports — especially to EU, African and Arab markets — to $100 billion, through the implementation of a strategic plan.


Turkish crypto founder flees with reported $2bn

Turkish crypto founder flees with reported $2bn
Updated 22 April 2021

Turkish crypto founder flees with reported $2bn

Turkish crypto founder flees with reported $2bn
  • Launched aggressive campaigns to lure investors
  • Founder reported to have flown to either Albania or Thailand
ISTANBUL: Turkish prosecutors on Thursday opened an investigation after the Istanbul-based founder of a cryptocurrency exchange shut down his site and fled the country with a reported $2 billion in investors’ assets.
The Thodex website went dark after posting a mysterious message saying it was suspending trading for five days on Wednesday because of an unspecified outside investment.
Turkish security officials then released a photo of Thodex founder Faruk Fatih Ozer going through passport control at Istanbul airport on his way to an unspecified location.
Local media reports said Ozer — reported to be either 27 or 28 years old — had flown either to Albania or Thailand.
HaberTurk and other media said Thodex shut down after running a promotional campaign that sold Dogecoins at a big rebate — but did not allow investors to sell.
Reports said the website and the entire exchange had shut down while holding at least $2 billion from 391,000 investors.
“The victims are panicked,” investors’ lawyer Oguz Evren Kilic was quoted as saying by HaberTurk.
“They are lodging complaints at prosecutors’ offices in the cities they reside.”
Prosecutors launched an investigation into the businessman on charges of “aggravated fraud and founding a criminal organization,” the private DHA news agency said.
Thodex has launched aggressive campaigns to lure investors.
It had first pledged to distribute luxury cars through a flashy advertising campaign featuring famous Turkish models.
The platform then launched its Dogecoin drive.
The cryptocurrency is getting particularly popular among Turks who are looking to preserve their saving in the middle of a sharp decline in the value of the local lira.
The Turkish crypto market remains unregulated despite growing skepticism from President Recep Tayyip Erdogan’s government about the safety and use of digital currencies.
The Turkish central bank has decided to ban the use of crypto currencies in payments for goods and services starting from April 30.
It warned that cryptos “entail significant risks” because the market is volatile and lacks oversight.
“Wallets can be stolen or used unlawfully without the authorization of their holders,” the central banks warned last week.

Riyadh property prices rise 2% in Q1 even as rents fall

Riyadh property prices rise 2% in Q1 even as rents fall
Updated 22 April 2021

Riyadh property prices rise 2% in Q1 even as rents fall

Riyadh property prices rise 2% in Q1 even as rents fall
  • Mortgages rise, underpinning demand
  • Office sector remains under pandemic pressure

RIYADH: Property prices in the Saudi capital edged higher in the first quarter even as rental rates eased, JLL said.
Riyadh’s residential sale prices registered an annual increase of 2 percent for apartments and villas. By contrast, rental rates reported yearly declines of 1 percent for apartments and villas, it said. Some 7,700 homes were handed over during the period, the broker said.
“Looking ahead, the government initiatives that are pushing Riyadh to be the business hub of the region are expected to spur local and international demand,” JLL said in the report.
It said that strong government support helped to boost demand for residential property in the first three months of the year.
New mortgage loans for individuals jumped by 33,000 contracts in January 2021, it said.
The total value of mortgages increased to SR16.4 billion, according to the Saudi Arabia Monetary Agency (SAMA).
The Riyadh office market remains under pressure with average lease rates across a basket of Grade A & B office spaces in the city falling by 2 percent over the quarter compared to a year earlier.