The Scottish asset management firm where employees should be crying out for deferred stock
Investment banks are paying an increasing proportion of their bonuses in deferred stock, which hasn’t been great as stock prices have tumbled. Over at Aberdeen Asset Management, however, it’s a different story.
In the past three years, Aberdeen’s share price has more than doubled. 24.4m shares awarded to its employees in December 2009, vesting equally over three years, were worth £11.2m a year at the time of issue. By 2010, this figure had risen to £15m. By 2011, it had risen to £16.4m. Assuming the share price doesn’t deviate too far away from the current level before tomorrow when the next tranche vests, this year's slice will be worth £27.2m.
In total, the value of the award will have risen by £24.8m over the three years.
Even better: Aberdeen’s stock bonuses aren’t subject to performance conditions or clawback. Jon Terry, a partner in the reward and compensation practice at PwC, says this is quite normal at asset management firms.
Aberdeen’s shares are disproportionately awarded to its senior executives. Martin Gilbert received 80% of his £1.4m bonus as deferred shares in 2009. Deputy chief executive Andrew Laing’s £220k bonus was similarly allocated, as was finance director Bill Rattray’s £206k award.
While Aberdeen’s stock has been rising, the same can’t be said for banks. In the past three years, RBS stock has gone from 342.6p to 294.6p, Morgan Stanley’s from $31.52 to $16.88 and Bank of America’s from $15.9 to $9.76.
Aberdeen didn’t return our requests for comment.
Unsurprisingly, specialist asset management headhunters say that there’s a high degree of loyalty among employees at Aberdeen. However, lucrative deferred stock awards aren't the only reason for this. It helps that three out of four of Aberdeen's UK offices are in Scotland, where anecdotally staff are more loyal. “There are fund managers north of the border – Baillie Gifford and Aberdeen Asset Management – where both financial incentives and a sense of stability and affinity with the culture, means turnover is very low,” says Graeme Knox, director at Scottish asset management headhunters Knox Consultancy.
There's also evidence that Aberdeen pays generous performance bonuses. Analysts at J.P Morgan Cazenove pin this year's 9% increase in operating expenses to £594.6m to higher performance-related staff costs.
“It’s always been incredibly difficult to extract people from Aberdeen and, although a number of my clients would dearly love to get their hands on some of the high quality individuals there, it’s very hard to persuade people to leave,” says Chris Manfield, founder of headhunters Eiger Advisers.
Aberdeen is undoubtedly on a roll – in its annual results this week it reported an 11% increase in revenues to £869.2m and a rise in AUM from £169.9bn to £187.2bn. The success of its global emerging markets business, which represents about a third of its AUM, is part of the reason for the surge in share price over the last 18 months.
Analysts appear optimistic that Aberdeen’s share price will continue to defy gravity. J.P Morgan Cazenove was the most buoyant with a target of 414p, but Credit Suisse (380p) and UBS (370p) all expected an uplift.
