Abrdn’s share price continues to gain as it eyes Europe’s ETF market

Abrdn’s share price has continued its upward trajectory in 2023. To further boost growth the company is now looking to enter the growing European ETF market with two new funds. However, a ratings downgrade from Jefferies and punishing interim results will give investors concern.

Abrdn’s [ABDN.L] share price is up over 12% since the start of the year, as the asset manager continues to put its ejection — and subsequent re-entry — to the FTSE 100 behind it.

Back in August a slump in both business and the share price led to Abrdn being booted out of London’s leading index. Yet by December the company formerly known as Standard Life Aberdeen had been promoted back to the top flight. Now Abrdn is looking to Europe’s ETF market to boost growth.

Abrdn enters Europe’s ETF market

To increase inflows Abrdn is entering Europe’s ETF market. In November the company registered the Abrdn Metaverse UCITS ETF and the Abrdn Global Estate Active Thematic UCITS ETF with the Central Bank of Ireland. Abdrn already has a US ETF business with $7.2bn under management.

A comparable fund to Abdrn’s metaverse ETF is the iShares Metaverse UCITS ETF [MTAV]. Launched in December last year, the ETF tracks the performance of companies that develop metaverse-related technologies, including virtual reality and graphics processing units (GPUs). Since its inception on 7 December, the ETF has gained 4.4%, and nearly 11% since the start of the year, propelled higher by top holding Nvidia’s [NVDA] 31% gain this year.

The Abrdn Global Estate Active Thematic UCITS ETF will compete in Europe’s actively-managed ETF market, which more than doubled from €7.4bn to €16bn at the end of July 2022, according to Morningstar data.

Jefferies downgrades Abrdn, upgrades Man Group

Analysts at Jefferies downgraded Abdrn from ‘buy’ to ‘hold’ mid-January. The analysts said that Abdrn’s share price performance in the fourth quarter of 2022 benefitted from more buybacks and the asset manager’s return to the FTSE 100. However, upcoming tailwinds include turning around its core investments unit and replacing outgoing chief financial officer Stephanie Bruce. The analysts upped their price target from 210p to 215p — a 1.2% upside on Friday’s close.

“Whilst further capital returns seem likely as it looks to sell its ~10% stake in HDFC AMC (pending regulator approval), the ability to execute a sizeable buyback in the ST is limited ahead of the renewal of its AGM (10-May) authorisation,” said Jefferies.

Jefferies was keener on Man Group [EMG.L], upping its rating on the stock from ‘hold’ to ‘buy’, along with pinning a 285p price target on the stock. Hitting this would see a 13% upside on Friday’s close of 251.9p.

“Extraordinary capital returns should remain an attractive recurring feature of the equity story,” said Jefferies when it came to Man Group. They also pointed out that Man Group should offer some “cheap downside protection” should momentum in the markets start to “unravel”.

The next test for Abrdn

For all the talk of metaverse ETFs and analyst downgrades, there’s no getting away from Abrdn’s disappointing interim results. Published in August, these showed pre-tax losses of £320m for the first half of 2022. Assets under management (AUM) had dropped to £508bn, down from £542bn in the previous year, and fee-based revenue was down 8% year-on-year.

To get things under control, chief executive Simon Bird announced in August that Abrdn was looking to make £75m in cost savings by 2024. The strategy involves merging or axing over 100 funds. At the end of last year, the Emerging Markets Local Currency Bond was closed after its net asset value dropped to $20.47m, while January saw the announcement that Abdrn would merge four other funds. 

Inflation, recession and geopolitical uncertainty have piled the pressure on Abrdn, as investors pulled money out of funds. However, outflows had been creeping up long before the advent of last year’s gloomy markets. The next big test for Abrdn is 28 February when full year 2022 results are published.

Of the 16 analysts offering ratings on the Financial Times, half rate Abrdn ‘underperform’. A median analyst price target of 185p would see a 12.9% downside on Friday's close.