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The Ambitions of Aberdeen CEO Martin Gilbert

Can a man who has spent his career buying and beating the competition as CEO of Aberdeen Asset Management live with his biggest challenge yet: an equal?

  • Joe McGrath

The indoor putting green just off London’s bustling Cheapside is anything but cheap. Softly lit and richly attended by the City’s financial elite, sport blends with business, and recreation with competition.

Welcome to Martin Gilbert’s turf.

Aberdeen Asset Management has its name on the European Tour, and putting greens in its London office reception area. Gilbert, the chief executive, hobnobs with visitors flowing in and out of Aberdeen, the U.K.’s fourth-largest fund management group. By late summer it’s set to be among the largest in the world — or, rather, half of a new global giant.

Aberdeen has struck a “merger of equals” with insurance and fund group Standard Life.

Just as in golf, two leading players will navigate the course when the deal completes. Gilbert, after playing as king of the greens for decades, is to jointly take the helm with Standard Life’s Keith Skeoch of what will be Europe’s second-largest fund manager.

This new role as co-CEO of Standard Life Aberdeen has raised the eyebrows of those who would prefer a single leader for the business. But he is unfazed.

Gilbert knows scale is everything at this industry moment, and, like any keen golfer, he prefers an albatross to a birdie.



Mastering a skill takes 10,000 hours, Malcolm Gladwell famously wrote in Outliers. If that is correct, Gilbert is well on his way to mastering the art of the deal. It could be argued that he has been practicing for a deal of the Standard Life-Aberdeen scale for his entire career.

Back in 1983, Gilbert and two other men took part in a management buyout of the investment department of Scottish law firm Brander & Cruickshank. The new entity would be known as Aberdeen Fund Managers. At the outset the company had share capital of £10,000 (then about $6,500), with £70 million of assets under management. For that first year Aberdeen reported a profit of £87. After tax the firm actually lost £687.

“It was the best decision I have ever made,” Gilbert recalls, “and such an exciting time starting the business with George [Robb] and Ronnie Scott Brown.”  

Three years after the buyout, the Scotsman quit his fund management duties to focus full time on running the young company. Mass deregulation of U.K. stock markets — known as the “big bang” — presented Aberdeen an opening, and it pounced. In 1987 the company opened its first London office, ushering in a long period of growth.

By 2005, Gilbert’s confidence had grown. So too had his ambition. He was arguably the key player in pulling off the audacious acquisition of Deutsche Bank’s troubled U.K. investment management division. When the German bank decided to put up for sale certain U.K. operations at DWS Investments and Deutsche Asset Management, Gilbert sniffed opportunity. He instigated a rights issue that added some £30 billion of assets to Aberdeen’s treasure trove overnight, plus an additional £12 billion in the weeks that followed on completion of the acquisition of a related U.S. entity. The deal transformed Aberdeen and elevated the group to the top tier of British fund management.

The Deutsche deal earned Gilbert kudos from across the City of London and gave the Scotsman a thirst for more.

“Deutsche was transformational,” he remembers. “It virtually tripled our assets under management and provided a platform to market our investment capabilities to institutional investors around the world. The Deutsche deal also gave us the operating model to acquire and integrate subsequent large-scale businesses: Credit Suisse and SWIP [Scottish Widows Investment Partnership].”    

II Deep Dive: Standard Life, Aberdeen Seek to Stem Outflows Through Merger

The global credit crisis of 2008 had badly affected so many financial institutions that an experienced bargain shopper like Gilbert — leading a company in vigorous financial health — now had options.

So in 2009 he did it again, lining up Credit Suisse’s fund management arm in his crosshairs. This deal brought out Gilbert’s competitive streak: He knew rival Schroders was also sniffing around. And by that summer Gilbert had edged out his London rival for the prize of some £35 billion in assets to manage.

The Deutsche Bank and Credit Suisse deals proved Aberdeen as a serious player in European asset management. With the credit crisis having devastated two major British banks — Royal Bank of Scotland Group and Lloyds Banking Group — Gilbert again sought to buy low and build out.

A 2010 acquisition kept him limber and padded Aberdeen with another £14 billion of assets. Three years later Aberdeen nabbed SWIP, once again putting the industry on notice. That acquisition took Aberdeen’s assets to a whopping £325 billion, according to its 2014 full-year results, eclipsing all other U.K. fund managers.

But this time Gilbert wasn’t basking in a post-deal glow. Analyst sentiment was mixed. Those who approved did so with a golf clap, not the West End curtain call of prior deals. City commentators noted SWIP’s recent outflows, its low-margin life insurance assets, and a clutch of underperforming funds. Recognizing the weaknesses, Gilbert took swift action to replace managers on nonperforming funds and merge bad performers into Aberdeen’s better equivalents where possible.

Yet outflows continued, exacerbated by investor pessimism toward Asia and emerging markets, which had historically been Aberdeen’s strong point. Gilbert knew that to stop this trend, the company had to diversify.

And over the coming months, he made a series of smaller (for him) acquisitions: FLAG Capital Management, Arden Asset Management, Advance Emerging Capital, and Parmenion Capital Partners. The strategy reinflated assets to £312 billion by the autumn of 2016. But Gilbert and his colleagues recognized falling fee income — a problem that couldn’t be solved by buying more, but rather by spending less. Aberdeen outlined a £50 million cost-cutting program that would continue into 2017, when the Standard Life deal arrived on the scene.



The stakes are high. Analysts have honed in on the cultural challenges of merging two massive institutions, each rich with its own history. And the risks of merging two CEOs.

With a deal of this scale and complexity, there is “plenty of scope for issues” along the way, warns Pras Jeyanandhan, European equities analyst at Syz Asset Management. “Standard Life Aberdeen will have to find a way of making the co-CEO structure and large board work cohesively and effectively. I would expect a succession plan to emerge in due course that returns the business back to a simpler CEO and chairman setup.”

Starting with Gilbert, Jeyanandhan sees job insecurity all the way down. A £35 million bonus pot earmarked for portfolio managers allays some concerns, but he stresses that nothing has been said publicly about retaining key staff members in functions such as sales. “Good people could be lost along the way, but this is to be expected,” he says. “Aberdeen has seen countless deals and is experienced at integrating businesses.”



On his journey to becoming co-CEO — in charge of £660 billion and a team of 9,000 — Gilbert paid dues as an accountant and fund manager before focusing on management exclusively. Over the past 30 years as Aberdeen’s senior executive, he has learned to navigate corporate egos and choppy regulatory landscapes as he might a sand trap: deftly.

Perhaps Gilbert’s toughest management lesson came at the turn of the millennium when Aberdeen foundered in the split-capital investment trust crisis. Like many fund managers, Aberdeen had sold split-cap investment trusts — fund vehicles offering different share-class tranches, and typically with a set lifespan of five to ten years. But Aberdeen sold more of them, including some invested primarily in other split trusts, and leveraged up the whole wood pile. After the technology, media, and telecommunications bubble burst in 2001, funds nursed heavy losses — and those leveraged up, even more so. Aberdeen’s Leveraged Income Fund, an investor in other split caps, saw nearly all its value wiped out.

Gilbert faced severe questions from the U.K. regulator. Aberdeen was the largest player in the sector, with 19 split-cap funds that saw hundreds of investors losing their investments. Parliament summoned Gilbert to face the government’s Treasury Select Committee, and grilled him.

A media frenzy ensued, and well-known market commentators began warning that the firm would have to be sold off or rebranded due to reputational damage. More insisted on a change of management. But Gilbert wasn’t going anywhere — except to Westminster for a bollocking. Instead, he conducted a strategic review that refocused the business on institutional money while disposing of several retail funds.

“What I learned from split caps is that we didn’t know anyone,” Gilbert reflects. “Since then I have made it my job to make sure that I know all the editors.” If something has gone wrong in the business, he reasons, knowing the press means getting a phone call.

Mike Foster — a former financial journalist of 40 years with Dow Jones, the Daily Mail, and London’s Evening Standard — sees the executive’s popularity with voices of influence as key to his success. “Gilbert has a unique understanding of the importance of the media to developing a business,” Foster says. “Charm is his weapon of choice.”

In the U.S. it’s Scotch and Michelin stars. Aberdeen’s New York press lunches pull in reporters from all the major financial news outlets, and serve wine — a shocking departure from the U.S.’s iced-tea norm. Around the holidays, branded bottles of Aberdeen Scotch and logoed glasses replenish journalists’ home liquor cabinets, or work liquor stashes.

Romancing the political classes is just as important, Gilbert acknowledges. He recalls significant political maneuvering in the Treasury Select Committee’s line of questioning during the split-cap crisis. He would be better prepared today. “It is my job to make sure that I know every politician in the U.K.,” he says. “I will work with any politician in power and that is part of my job.”



After the announcement of a potential merger, employees began to wonder where the ax might swing. Gilbert acknowledges that swing it will: “I think where tough decisions are made they need to be fair and ensure people leave on good terms. Asset management is such a small world. Our focus is to minimize redundancies as much as possible.”

The new business aims to cut 900 positions, he says, of which at least 600 may go through natural attrition and the remainder likely through dismissals. He says people have already come forward to volunteer. The attrition target is achievable, in his view, given that around 1,000 individuals typically leave Aberdeen each year.

In total, he says, the business will save £200 million over three years, but this excludes exceptional charges such as office mergers, which could amount to one-off payments of up to £320 million.

Merging corporate cultures is a tricky business, and Gilbert’s experience will be invaluable if he is to stamp out a them-and-us mentality that may linger at a combined business. But he sees himself as “a bit of a chameleon” and has a track record of winning over teams brought under his stewardship.

In June, Standard Life Aberdeen released the new investment management committee lineup under the combined entity. It balances expertise from both former heavyweight corporations.

Notably absent from the announced committee, though, was Hugh Young, a key figure in Aberdeen’s success over the years. Young, a managing director until the merger, was widely credited with saving Aberdeen during the split-cap crisis by maintaining a successful operation in Singapore. Thanks to the Asia outpost, Aberdeen had flows uncorrelated with the crisis in London.

Young’s absence from the announcement supported rumors that his role would diminish post-merger, as Rod Paris — Standard Life’s current chief investment officer — instead takes the prized single CIO spot. Young is to remain with the combined group as Asia business head, running the regional equity team, and Gilbert maintains that both Paris and Young will be “vital” after the merger, noting that they have “very similar personalities.”

“Both Rod and Hugh are fairly modest,” Gilbert says. “One comes from an equity background and the other from a fixed income background. They are both thoughtful and have no egos.”

When asked whether any of his team will be unhappy with their new responsibilities as a result of the merger, Gilbert says there will be no place for prima donnas in the new corporate beast.

“If somebody wants to go, they should go,” he says. “But neither of those two” — Young or Paris — “wants to go, and they are vital to the business, both really important.”

Asia is to become a “big target market” for expansion, he says. Indeed, Standard Life chair Gerry Grimstone is a vocal fan of further expansion on the continent.

Gilbert says the new group will have a significant presence in India and Singapore, and is set to become one of the largest players in the latter market. It will also have operations in Australia, Hong Kong, and China.

Gilbert hopes China’s government will relax some of the recent currency controls that have restricted flows. In anticipation, the group will bolster its Shanghai presence “sooner rather than later,” and Gilbert has tasked Young with the drive.

The combined business also has domestic issues to deal with: foremost, Britain leaving the European Union. The asset management arm will have a post-Brexit operation in Luxembourg, while the insurance arm will have an operation in Dublin.



Gilbert says the long-term plan is for the combined business to distance itself from the connotations of the past. Traditionally, Standard Life Investments was predominantly regarded for its Global Absolute Return Strategies fund, while Aberdeen was often referred to as “the emerging-markets manager.”

To change this perception, Gilbert is willing to be ruthless. Of the £50 billion GARS fund, he says, “If it performs, it is a great fit. But if it doesn’t, then it isn’t. Operationally, we will look at the assets.”

GARS had been the jewel in Standard Life Investments’ crown, but evidence suggests it fell out of fashion recently. In its 2016 results Standard Life confirmed “lower demand” for the product, and investment consultant Mercer put the strategy on its watch list last summer. Flows have slowed over the past year, a Standard Life spokesperson confirmed.

Gilbert says he isn’t too concerned about GARS, noting that Aberdeen’s own diversified growth fund — once a GARS rival — has recently been “doing very well” and will continue to sit alongside its larger rival post-merger.



Gilbert acknowledges that Aberdeen and Standard Life have evolved from very different starting points and very different cultures, but says they have always shared the ambition to be world-leading investment companies.

“The merger accelerates both companies’ ambitions as the deal is extremely complementary in terms of investment-capability strengths and distribution strengths,” he says, making the pitch he’s surely repeated hundreds of times. “Culturally we’re both Scottish companies with a global outlook, and we’re both big believers in the having-a-tea approach.”

“Where there are subtle differences,” he says, “perhaps Aberdeen is a little bit more entrepreneurial and Standard Life more process driven — I think the combined business will benefit.”  

Part of building this appreciation of scale will be sustained investment in marketing and, in particular, backing major sporting events.

Sports have long been integral to Aberdeen’s marketing mix. The firm’s name has adorned sponsored individuals, teams, and global events in golf, rowing, soccer, sailing, motor racing, hockey, and rugby over the years.

In this regard, Aberdeen may have found a like-minded bedfellow. Edinburgh-based Standard Life shares Aberdeen’s passion for backing major sports teams, albeit with a preference for rugby, as its recent British and Irish Lions tour sponsorship proved.

Both companies’ global aspirations were part of the attraction in the deal announced earlier in the year, when they said the combined Standard Life Aberdeen group would look after £670 billion in assets across 80 countries.

Gilbert wants to build on the recognition of the group’s brands. While the group will be listed on the stock market as Standard Life Aberdeen, the asset management arm brand will be known as Aberdeen Standard and the insurance arm will retain the Standard Life moniker.

“The key is to make sure that the investment in big brands is carried forward,” Gilbert says. The global exposure Standard Life Investments enjoyed from sponsoring the Lions rugby team was “staggering,” and in his view, social media alone justified the cost of the campaign.

Unsurprisingly, Gilbert is keen to retain the long-standing sponsorships with golf. The key event for the business is the Scottish Open, which is shown in the U.S. on broadcast television. He says the Scottish Open generates “a large multiple of what we pay. We want to raise awareness in the U.S. market.”

Beyond golf, Gilbert wants to bolster brand recognition in the companies’ U.K. home markets by sponsoring major sports celebrities such as British tennis ace Andy Murray and Olympic sailing medalist Ben Ainslie.

Sailing is one of the sports Gilbert believes is of growing importance to reaching the market the business is targeting. In particular, the America’s Cup, which he likens to “Formula One in the ’90s.”

Ultimately, if the new entity is to continue to be seen as a competitor on the world stage, Gilbert’s strategy will need to go further than high-profile marketing. Regulatory headwinds persist and the business will increasingly need to justify the charges it passes on to its customers. Meanwhile, the global shift to passive asset management means fund firms need to lean more heavily on their scale and sweep up assets in greater volumes to lower their costs. As Gilbert contends, “It’s all about distribution.”

With a fund manager of this size, he’s well positioned to sink one cleanly from the green — but winning now depends on his partner doing the same.