Aberdeen Standard to ramp up co-investments globally

The newly-merged investment business of Aberdeen Asset Management and Standard Life Investments is seeking to boost its exposure to co-investments and increase its focus on investing in smaller GP deals.

Aberdeen Standard Investments, the asset management business of UK insurer Standard Life Investments and Aberdeen Asset Management – now called Standard Life Aberdeen – is focusing more on co-investments, according to Wen Tan, co-head of private equity Asia Pacific at Aberdeen Standard.

Up to 25 percent of Aberdeen’s private equity portfolio, which stands at more than $14 billion, may be invested into co-investments, the fund of funds manager indicated in its latest annual report.

Already the firm has been proactive in the co-investment space and during the first quarter of the year in Asia, Aberdeen completed a co-investment alongside China-focused private equity firm Redview Capital into Source Photonics, a Los Angeles-based manufacturer of specialist electronics components for data centres, at a 7x EV/EBITDA valuation.

Other recent co-investments from the firm include Italian digital textile printing business Imprima, Chinese second hard car company Carsing, and Australian beef processor and exporter KRW Group.

Along with developing its co-investment portfolio the firm also reemphasised its focus on lower mid-market fund investing – where there is less competition for deals and entry multiples are more attractive than the large-cap space, according to Tan.

In Asia Aberdeen has made commitments to Chinese private equity firms Legend Capital and Hony Capital, Japanese mid-market manager Japan Industrial Partners, Saratoga Capital and NSI Ventures in Indonesia, as well as Anchorage Capital Partners and Archer Capital in Australia. Standard Life on the other hand has not yet been active in private equity in the region.

Tan said the merger has not had a material effect on the investment strategy in Asia and that firm is “currently busy investing and integrating”. He added that earlier entities – Aberdeen Private Equity and SL Capital Partners (Standard Life’s Europe-focused private markets arm) – are complementary with no overlap in Asia and minimal overlap in the US.

Aberdeen Asset Management and Standard Life completed their merger on 14 August, resulting in a combined investment business worth £583 billion ($758 billion; €641 billion) of assets, making it Europe’s second largest asset manager.

Aberdeen is not new to high-profile mergers. The firm acquired Connecticut-based FLAG Capital Management in May 2015, which took over Hong Kong-based fund of funds Squadron Capital Management in 2012. Aberdeen also bought asset management business Scottish Widows Investment Partnership in 2013.

While Aberdeen Standard’s overall portfolio and performance data is not publicly available, according to the latest annual report of its listed private equity vehicle Aberdeen Private Equity Fund PLC, close to 85 percent of the portfolio was invested in 33 private equity funds, 10.3 percent in co-investments and 4.8 percent in cash. In sterling terms the portfolio delivered a total return of 8.8 percent for the year to 31 March 2017. More than 50 percent of its portfolio is allocated to North America, 29.9 percent to Europe, 11.4 percent to Asia Pacific and the remaining 2 percent in Latin America, Africa and the Middle East.

Limited partners in Aberdeen and SL Capital’s funds are mostly UK and US pension funds including San Bernardino County Employees’ Retirement Association, City of Baltimore Fire & Police Retirement System and Surrey County Pension Fund, according to PEI data.