Was investing in the investors a bad idea?

As Leo Tolstoy taught us at the beginning of Anna Karenina, “Happy families are all alike; each unhappy family is unhappy in its own way.” It’s a lesson being relearned by investors in European asset managers, whose shareholdings have woefully missed out on the gains enjoyed across the broader equity market this year.
The environment for the fund-management industry continues to be challenging, to say the least, with downward pressure on fees, investor preference for cheap index-tracking products and an expensive arms race to keep up with the latest technology. But the biggest laggards among Europe’s standalone money managers have underperformed for idiosyncratic reasons.
Ashmore Group Plc is perhaps the most distinctive member of the gang, given its focus on emerging markets with a strong bias towards fixed-income. Its shares are down by a third this year; in the third quarter, net outflows of $1 billion combined with market losses of $2.1 billion to wipe more than 3.3% off its assets under management, reducing the pile to $91.3 billion.
Those losses are likely to have widened amid a wrong-way bet on China Evergrande Group. By mid-year Ashmore owned at least $400 million of bonds issued by the Chinese property developer, which had dropped in price as the company missed interest payments. By the end of September, Ashmore had added a further $100 million to its Evergrande investments, Bloomberg News reported. Evergrande dollar-denominated bonds have extended this year’s slump.
Bloomberg reports that Evergrande plans to restructure all of its debts, including offshore and private obligations.
It owes dollar bondholders alone more than $19 billion. Ashmore could be nursing heavy losses on its investments, particularly as Evergrande’s turbulence has contaminated the entire Chinese offshore bond market, driving yields higher and prices lower.
Meanwhile, the woes that have driven Abrdn Plc’s shares down by 17% this year are more deep-seated than those afflicting Ashmore. The merger that created the firm in 2017 has failed to stanch outflows, with assets under management at mid-year down to 532 billion pounds ($702 billion).
A rebranding exercise that changed the company’s name from Standard Life Aberdeen was widely ridiculed.
Earlier this month, Abrdn agreed to spend 1.5 billion pounds buying investment platform Interactive Investor Ltd, adding 400,000 customers with 55 billion pounds of investments.
Morgan Stanley analysts pointed out that the purchase price works out to 43 times 2020 earnings, almost double the multiple at which market leader Hargreaves Landsdown Plc trades. Just over a year since taking charge as Abrdn’s chief executive officer, Stephen Bird may have overpaid out of eagerness to grow the firm’s personal wealth business.
For DWS Group GmbH, its efforts to dominate the growing franchise for environmental,
social and governance funds have backfired.

—Bloomberg