The right kind of resilience: The Aberdeen Asset Management chief has an outsider’s determination

August 11, 2013 1:58 pm

The right kind of resilience

By David Oakley

Dressing down: Martin Gilbert was once accused by UK MPs of acting like a ‘sophisticated snake oil salesman’

Martin Gilbert nearly quit just over 10 years ago. Surrounded by government ministers, civil servants and journalists, he was publicly dressed down by one of Britain’s most senior politicians, accused of acting like a “sophisticated snake oil salesman” at a parliamentary hearing into one of the City of London’s biggest financial scandals. He remembers that summer day in 2002 as if it was yesterday, he says, a grim expression spreading across his face. “It was undoubtedly the most difficult moment for me,” he says. “There was nothing else ever that has rivalled it in any degree, and I hope nothing does in the future.” His career as head and co-founder of Aberdeen Asset Management looked like it was about to end in disgrace amid the ruins of the split capital investment trust (or split caps) scandal, when a number of the company’s investment trusts folded and wiped millions of pounds off its share price.But today, Mr Gilbert has turned his reputation round to become one of the most respected and longest serving chief executives in the FTSE 100. In June, he celebrated 30 years as head of Aberdeen, having transformed the group from a small manager of money in the Scottish backwaters, with just a handful of employees, to a global company with 31 offices in 24 countries around the globe and more than £200bn in assets under management.

Looking back to that parliamentary hearing and the withering character assassination by John McFall, now Lord McFall, the Labour MP who chaired the committee investigating the split caps fiasco, Mr Gilbert shakes his head. Like the financial crisis of 2007, the problem was leverage as fund managers borrowed heavily from banks to invest in these trusts that were split – hence the name – into risky equities offering high dividends and safer equities that supposedly offered a guaranteed capital return. When the market crashed after the dotcom bubble burst in 2000, fund managers could not repay the loans and the split cap investment trusts were forced into insolvency, costing thousands of pensioners and small investors their life savings. In the end, Aberdeen had to cough up £78m as part of an industry-wide compensation settlement.

“At the time, we almost went bust,” says Mr Gilbert. “Our market cap was down at £30m [It is nearly £5bn today]. I mean we . . . took a pounding. No chief executive survives a 90 per cent fall in the share price. I survived a 97 per cent fall.”

Indeed, Mr Gilbert is nothing if not resilient. Interviewing him at Aberdeen’s sleek London offices just by St Paul’s Cathedral, this resilience comes across in an almost aggressively defiant way. He is flamboyant, unconventional and clearly someone who has the confidence to disregard the opinions of others.

He says he has the determination of an outsider, someone who grew up, if not on the wrong side of the tracks, then on different ones to the conventional City financier. Born in Kuala Lumpur, and spending part of his childhood in Malaysia, where his parents managed a rubber and oil palm plantation, and then Aberdeen, he also has a worldliness that, he says has helped him as a businessman.

“I’m not a conventional chief executive,” he says. “I am very much an outsider. I will never be part of the establishment, but then I think that can help in business.

“I have also travelled a lot and experienced at first hand as a child how hard-working and entrepreneurial people in Asia are. My experiences have given me a work ethic and a determination to succeed.”

Certainly, today Mr Gilbert does not look like a conventional chief executive in jeans and an open-necked shirt. He is about to fly to Aberdeen for the weekend and has jettisoned his suit. Short and stocky, he comes across as younger than his 58 years, which is in part due to a boyish personality.

The CV

Born: July 13 1955, in Kuala Lumpur
Education: 1960 Alice Smith School, Kuala Lumpur
1964 Robert Gordon College, Aberdeen
1973-1978 Aberdeen University, MA in Accountancy, LLB in Law
Career: 1978 Trainee chartered accountant, Deloitte
1982 Trainee lawyer, Brander & Cruikshank
1983 Co-founder and chief executive, Aberdeen Asset Management
Other positions: Non-executive director of British Sky Broadcasting; adjunct professor of finance, Imperial College Business School; Member of the Scottish Government’s Financial Services Advisory Board
Family: married; three children

This dynamism that has helped him turn Aberdeen into one of the asset management industry’s stellar performers. This year it announced record profits, while its share price has risen more than 1,000 per cent in the past 10 years.

From humble beginnings in a small office in Aberdeen in 1983, the group has expanded into the Asia and US markets, managing money for clients from small investors to multinational pension funds, developing a powerful presence in a variety of asset classes from equity to bonds to property, making the company the second-biggest listed asset manager in Europe, just behind Schroders.

His strategy for success has been simple: “Delegate and get the right people around you. That is important. I found delegating hard at first, but as the company gets bigger, you have to. You cannot do everything.

“The first billion was the hardest to get. After that it came easier as success breeds on success. But you need a good team.”

His good team consists of people he knows and trusts, such as Andrew Laing, his deputy chief executive, who has been at the company since 1986, and Bill Rattray, his finance director who has been at the group since 1985. They were also school friends from his days as a boarder at Robert Gordon’s College in Aberdeen. They are the ideal complement to Mr Gilbert, men who like to focus on the details of the business, leaving their boss to concentrate on the big picture and overall strategy.

Critics, however, say Mr Gilbert needs to diversify his business further into markets such as the US, where it is still a relatively small presence.

He has also been criticised for holding too many jobs. He is a non-executive director at broadcaster BSkyB and was until recently chairman of First Group, the underperforming British bus and train operator, where some say he was forced to step down because of a lack of focus at the company as he concentrated on Aberdeen.

Mr Gilbert doesn’t agree entirely. “There are markets where we would like to expand further, like the US, but I think we are in a position to do that,” he says. “We have made some small acquisitions that are helping to develop our presence in America.

“On First Group, I don’t agree that I took my eye off the ball, but that is in the past now. No one has criticised me for not paying attention to business at Aberdeen.”

His appetite to build the company further underlines a desire to continue at the helm, despite his one-time quip that he would quit at the same time as Sir Alex Ferguson, a fellow Scot and former Manchester United football manager who stepped down after 27 years in May. “I have changed my mind about quitting when Fergie does. Maybe I will quit when I’m 71, like he did.”

He looks uncharacteristically pensive for a moment, then adds: “The roller-coaster ride will continue. But I intend to keep going up. I never want to experience the lows like I did over split caps. No one would want to go through that experience, but it helped me learn some important lessons.

“In business, failure can in the end help you succeed. It gives you perspective and toughens you. After 30 years, I have built up a lot of experience and have a much better understanding and perspective as far as the business is concerned. It has made me a better chief executive.”

Perhaps the last word should be left with Lord McFall, who came close to ending Mr Gilbert’s career with his forensic grilling and the powerful “snake oil salesman” description at the split cap hearings. “He is an example of someone who confronted the mistakes he made and learned the lessons,” Lord McFall says.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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