Investing.com — Shares of Abrdn (LON:ABDN) rose more than 6% on Tuesday after the investment firm reported better-than-expected net flows in the fourth quarter, signaling a potential turnaround in its overall performance.
Abrdn’s total net inflows for Q4 came in at £0.5 billion, better than the Visible Alpha consensus forecast of net outflows of £2 billion.
The surprise was driven by a strong £2.3 billion inflow in the Institutional and Retail Wealth segment, surpassing expectations of a £0.5 billion outflow.
Interactive Investor, a key growth driver since its acquisition, also exceeded projections, recording net inflows of £1.4 billion for the quarter.
The Institutional and Retail Wealth division bucked the trend, attracting new investments both this quarter and throughout the year, despite outflows in equities, multi-asset, and fixed-income.
Jefferies flagged the sustained demand for real assets, quantitative strategies, and liquidity solutions within this segment.
Overall assets under management in I&RW ended the year at £211 billion, an increase of £1.5 billion in the fourth quarter, though slightly down over the full year.
Interactive Investor continued to be a key driver of Abrdn’s improved financial performance, with Q4 net inflows surging nearly threefold to £1.4 billion, fueled by robust international trading and favorable market conditions.
The platform’s customer base grew by 8% in 2024 to 439,000, while self-invested personal pension (SIPP) accounts surged 29% to 81,000.
Trading volumes also climbed 29% compared to 2023, reflecting increased engagement among retail investors. Assets under administration (AUA) for II reached £77.5 billion by year-end, supported by £1.6 billion in market gains.
Jefferies highlighted Interactive Investor’s rapid growth as a positive for Abrdn, emphasizing its strong customer acquisition and increasing brand recognition. Analysts anticipate that this division will become a major contributor to the group’s overall profitability in the years ahead.
While the overall flow performance exceeded expectations, challenges remain in certain areas.
The Insurance Partners segment reported net outflows of £1.8 billion in Q4, bringing annual outflows to £4.3 billion.
However, market gains helped offset these losses, leaving AUM flat at £159 billion for the quarter and up £3.7 billion over the year.
The Adviser segment also faced continued outflows, with net outflows of £0.9 billion in Q4 and £3.9 billion for the year.
Abrdn is addressing these issues with steps to improve its service offering and pricing, as well as bringing in a new leadership team.
Jefferies noted that improving its value proposition is key to stabilizing this segment.
Abrdn’s transformation program is showing tangible results, with management reaffirming its £150 million cost-cutting target for 2025.
The company remains on track to achieve its adjusted operating profit guidance of £247 million for the year, while keeping operating costs below £1.075 billion as previously outlined.
“Although abrdn has now, at least partially, addressed its cost base, the deterioration in net flows and fee margins have more than offset this self-help attempt as we forecast weakening revenues to FY25E,” said analysts at RBC Capital Markets in a note.