tv Leaders with Lacqua Bloomberg May 21, 2016 9:00am-9:31am EDT
♪ to leaderselcome with me, francine lacqua. our guest is martin gilbert rum aberdeen asset management. his story begins in asia. born and raised in malaysia, he went to school in scotland at the age of nine, and he cofounded aberdeen in 1983. for 33 years, he has grown aberdeen into what of the biggest publicly traded asset managers with more than $400
billion of asset management. the group went public in 1991 and has offered 26 countries, including malaysia. thank you so much for joining us. lastyou look back at the 33 years, what would you have done differently? martin gilbert: definitely the two 2004.m 2002 we almost lost the company. the reparation took years to recover. ,hat was the darkest moment appearing before to treasury select committee's. i would not recommend that to anyone to aspire to. francine: dear member the times when you thought this is not going to work out, or did you always think if i keep my road, if i explain this, find my own deals, we will survive? martin gilbert: i think so. no one expected us to survive.
the newspaper said we would not. i didn't think we would not. maybe it is misguided confidence. i was the we are going to make it through. and we sold the retail division, which was the hardest decision i have ever had to make. we had about 300 people in aberdeen, where we are based, headquartered. tough.s certainly i knew if i could sell, if we can sell enough assets, we would survive. and in those days, banks were very supportive and helped us really survive. francine: it was a prophet? you is something that was valued wrong? martin gilbert: it was close and bonds which were gearing, and we were the market leader. unfortunately, some of it has been sold to retail investors unlike coo's, which were a mirror image of the capital investment trust.
there wasn't the same political interest and regular tory interest -- regulatory interest. with the longely market downturn, a lot of them did not survive. so the politicians discovered the subject. francine: did they change you as a leader? martin gilbert: absolutely. i suppose i gained a lot out of it. in good a business times is easy. it is a you manage them in difficult times that make or break you as a leader. i never gave up. one thing i always tell people when they ask, when people ask my advice or whatever about how to appear before select committees or what to do, i say, deal with what you can that day. don't look too far ahead. if you look too far ahead, you are going to give up and retire,
or whatever it is. francine: do you remember a certain day or hour when you actually thought, this is going to go ok for me? we are taking tough steps, but we will be stronger the company. martin gilbert: i knew with the 2004,tor in christmas eve i remember it so clearly, 12:30. we had about a minute more to get it. lucky.ber i was very time, iy at that established a relationship with him. we both wanted to get it settled , and we did with a minute to go. i knew theoment on, business had changed. i knew we would survive and become stronger as a business. francine: so after that, 2008 comes along, and you are thinking, we are fine, and i have been through so much from 2008, 2004, it was a bit like a
walk in the park. june 2007, it: in was at a conference and someone asked me what could go wrong? i said coo's are going to blow up. i didn't think it would blow up the financial system to the same extent that it had. we don't have any capital investment trust. francine: do you think that is in place so we don't mistake that either you made in 2002 or what went on the financial crisis in 2008? martin gilbert: i don't think we can ever avoid that. we can make it more difficult. what is good about regulation at the moment is trying to instill culture in senior management, which is why i do agree with a number of these measures, because if we at the top of organizations, it might be at its -- it might be asset management, insurance, do what is right for the client, the
world and the industry will be a better place. francine: what is the most difficult decision you have to take? martin gilbert: telling the retail division -- selling the retail division. generally there will be so many difficult decisions over the years, parting with colleagues i worked with since day one or whatever. and it is a people business, so always the top decisions are the people decisions. i really hate -- i am such a softy, i hate making hard decisions. francine: it is the people business. do you need face time with a lot of ceos you do business with? martin gilbert: yeah, asset management is not like investment where they are trying to tear each other's throats. we get on white well. i know most of the ceos, certainly all the ones in europe and the independent asset
managers and most of the u.s. we all have the same problems, so we discuss it openly. francine: up next in a time of negative interest rates, crude oil and market volatility, we ask you where he sees the biggest opportunities. martin gilbert: two thirds of the world growth is going to come from asia, so it is a very important region and a very important region to invest. francine: more coming up on leaders with lacqua. ♪
is it hard to be number one, number two, number three? totin gilbert: it is better be number one then number three, but we can get by with number three. size does matter in the asset management business if you are managing money for the biggest sovereign wealth funds in the world. so it is important. it is not important to be number one. i sure we will be number one again. francine: how you get to number one again? martin gilbert: a change in sentiment toward them emerging markets. in thene of the largest world, we have seen huge outflows out of emerging markets, asia, latin america. the second that changes, and we see flows coming back in, i am sure we will regain the number one spot. francine: how much does it have to do with sentiment? how much does it have to do with structural reforms not being made in certain emerging markets? when we see the downturn, they
have been hit so hard. martin gilbert: i think it is a mixture of a number of things. quantitative easing is definitely pushed the balanced markets up, strengthened the dollar, which has not been great for emerging markets. malaysia and brazil, does not help. but it does help india. two thirds of the world growth is going to come from asia. so it is a very important region, and a very important region to invest. the issue is finding the right companies, that is where we specialize, with people on the ground looking at companies to find the next big winner for our clients. francine: so does that mean our expectations, we have more coming back, need to be pushed down? five years or 10 years? martin gilbert: i think it will be sooner than that. of thekets move ahead
actuality, so we have already seen emerging markets shoot ahead this year. loved has been the least it rally i can remember. we have not seen any big flows coming in. so there have been massive short positions in emerging markets. it is a bit about that, and maybe we will see flows, i think this year, coming in. francine: how concerned about you with the price of oil? it went down, but now it is going up. it is range bound because of shale producers in the states. martin gilbert: i am bullish on the price of oil. i think by the end of the year, it will be back up around $60. i think the difference is the surplus and the deficit is about 2% or 3%. if we are led to believe reduction -- production falls
naturally 6% a year, it will come back in to balance quite quickly. and oddly enough, the unexpected consequences of the fall in the oil prices is very negative as far as emerging markets are concerned, because of sovereign wealth funds have had to liquidate by fixed positions in emerging markets, global equities, which has also held them back. francine: and when the fed starts normalizing interest rates again, we will see a lot of defaults. the dollar goes up, and we need to default in the space of commodities. you think it is systemic, and will it happen? martin gilbert: i do not think so. i agree the price of oil will not be great for the price of meant, it is not perceived to be great for emerging markets. that is pretty well run in a lot of companies. they are growing.
it is just a couple -- question of finding the right companies to invest in and the right countries. that is what we specialize in. francine: you are so into emerging markets. what if they take longer than expected? martin gilbert: that is not something i worry too much about, because it will inevitably happen. they are growing, and as i say, two thirds of the world's growth will come from them. china and india are growing at reasonable rates compared to we in the developed world. find the right companies and the right countries. we would, for instance, prefer india to china, shall we say, because it is more difficult to make money in china then it is in india. francine: you worry about negative rates, polisario test policy, monetary policy? martin gilbert: i don't worry about things i cannot influence.
i have opinions on them, but i don't have sleepless nights over negative rates. i think they are a really stupid idea. francine: what do you do, if they are stupid, do you need to helicopter money, or is that even worse? martin gilbert: it is funny. i have been to one of the major central bankers in the world, and i remember him saying that -- i was saying negative rates are stupid idea. he said, i don't want to tell my children in 10 years time after we have suffered the greatest depression in the world we did not try everything we could to avert it. i think the fear amongst central bankers is far greater than we actually as the sort of frontline actually think. but they have more information than us. maybe we should be listening. francine: they are worried about recession? martin gilbert: depression, if you speak to them. they do not know what to do.
because i only worry about things i have influence over. so what do you worry about? martin gilbert: running the business on a day-to-day business, and that is all about in your confidence with people. it ministers -- it matters more than -- clients want stability, so you have to keep your top team intact. i been working with the same team of four or five guys for 13 years, so we have a stable team. all aging of course, but they are still there. francine: what is the secret to retaining talent? every ceo tells a that is a top priority. we have an open plan with fund managers. i like to feel what is happening . i speak to people, and just generally listen. francine: you are approachable. martin gilbert: yeah. that is the key.
it is the approachable -- francine: and have a sense of humor. martin gilbert: if you don't want a sense of humor, you should leave the business. you are stressed if you don't have a sense of humor. francine: are you stressed? martin gilbert: not really, i have a good sense of humor. i promise i will believe you, but i know i will not like it. you need a sense of humor. francine: talk to me about something you don't have control over, which is liquidity. martin gilbert: yeah, regulators around the world are now focused .n liquidity and bond funds a lot of the assets are being transferred also think sheets into this big mega bond funds we all manage. and the quantitative easing and the low interest rates, people have been forced out of bank accounts into the bond fund, and regulators are worried that when this comes to term, we will see mass exodus from bond funds. we see a lot of work on
liquidity. francine: this is a concern for the next 12 months? martin gilbert: probably, it depends on how long interest rates remain low. and they will remain low for longer. i'm believe the next 12, 24 months. even in terms of market dissipation, usually there is only about a 5%, 10% withdrawal from funds. liquidity drives up, and that is the big issue. will the central banks step into provide liquidity as they did in 2008? these are the questions we are constantly wrestling with. margin aberdeen owns practically almost financial institution, be a insurance, be it banks, big banks, small banks. what do you look for in a financial institution leader? martin gilbert: i know them all because we are on various committees together, on boards or whatever.
we just want them to be leaders and be making the right strategic decisions, to be doing the sensible things. we don't put pressure on a standard chartered to raise returnn equity. what we want them to be is a sensible return on equity. getting back to what banks are doing, which is being nice dividends. doing the sensible things. francine: but you catch up with ceos every corner, every six months? how often do you get face time with them? martin gilbert: i tend to leave that to the fund managers. but i will speak to bill, as an example. maybe every three months, four months. he is very good at communicating. if he has something, he will always communicate, he will always communicate it to me, and i will pass it down the line to the fund managers. communication is very important, same with hsbc's they are very
good at communicating as well. so two-way communication, really making sure we are happy with the strategy. francine: you never thought of becoming an active shareholder? martin gilbert: not really. you are not activists, but we are very interested in what is happening within the company. we like to see the right leaders in position at the various companies reinvest in. francine: and is on a case-by-case basis, or is there ? line that you see replicating is it stamina, focus, and intellect? martin gilbert: there is a wide range of taking the banking sector as an example. i think most of the big banks now do have very good leaders, be it john cryan at deutsche or
tidjane at credit suisse. a lot of them are very tough jobs. i don't envy them what they have to do at the moment. francine: which banking leader has the toughest? martin gilbert: john cryan probably at deutsche as a tough job. tidjane has a good manager he can fall back on. think they have all got good bits, and they have all got investment banks. they are probably trying to downsize. francine: there is a lot of speculation about selling. would you ever step down? martin gilbert: i have never tried to sell the business, but we do get a lot of people wanting to buy us, which is very nice. so far we have managed -- francine: europeans? everywhereert:
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