ABERDEEN, SCOTLAND-Investment manager Aberdeen Asset Management,after 'changing the guard' at the head of its property division,will deepen its European funds and expand in Asia and USpost-crisis. It has no plans to sell German fund business Degi,says incoming head of property Andrew Smith. He succeeds RickardBacklund who is stepping down to take an advisory role.

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Smith, appointed in spring, also says that investment patternsare changing: After the global crisis, UK and US institutionsfocused on home markets but now are once again looking atcross-border diversification. The group has re-organised realestate activities, playing down its Aberdeen Property Investorsbrand and integrating more closely into the group. In real estateit manages around $31.6 billion in assets across many markets, witha traditionally strong position in Nordics and UK, plus the largeDegi business bought from Allianz in 2008.

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“The property team has been part of a wider Aberdeen AssetManagement for some time and one of the things we want to do is toreally benefit from being part of a wider multi-asset business,”says Smith. His history with Aberdeen has been curious. He joinedin 2002 as head of investment strategy and was part of a packagesold to investment manager Arlington – taken over soon afterward byGoodman. Aberdeen repurchased the business last year after theAustralian manager ran into problems. “I've joined the companytwice but I didn't actually leave in the meantime!” hesays.

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How does he view the state of real estate investment as he takesover? “I think we have seen a pause in cross-border investing by alot of property investors. If you look back two or three years, alot were moving to more of a cross-border approach through pooledfunds or funds of funds. It was becoming a much more globalindustry and in Europe more pan-European. The downturn focused manyinvestors more on domestic markets, with people pulling back alittle. But that's changing again now. It was only going to be atemporary setback as part of risk aversion. More European investorsare now contemplating raising allocations to foreign property.”

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Aberdeen currently manages 15 institutional funds open forinvestment, of which three are pan-European, six are Nordic orNordic-country focused, two are UK funds and one targets Germany.It also runs three fund of funds. “Certainly we would like toexpand the range,” says Smith. A sale of Degi is not on the cardsdespite the fact that it, as other German open-end retail fundmanagers, has encountered turbulence and closures dues to runs oncapital. Its Degi Global fund earlier this year re-closed after itwas obliged to make sharp valuation writedowns.

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“That's not the route we are following,” says Smith. “We arefocusing on using the Degi platform for building more of a solidinstitutional fund management business in Germany. The priority isto make sure we can stabilise the retail funds and the liquidityissues they face on behalf of existing investors.”Turning tocurrent plans, Smith says Aberdeen may eventually fill in its gapwith a country fund for France where it already $1 billion investedvia pan-European vehicles. Russia, where it dropped plans for acountry fund as the global crisis hit, is gradually coming backonto the radar. “After the scale of the downward valuation inRussia of something like 70% peak-to-trough, you can't ignore thefact the market looks fundamentally more attractively priced than ayear or two ago.”

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One big focus is beyond Europe: Aberdeen is working on its thirdAsian fund of funds, and looking harder at the US. “I think theenormous opportunity at the international level is segregatedaccounts; more investors are interested in having their ownportfolios rather than going through pooled vehicles,” Smith says.“But beyond Europe, there could be opportunities, certainly in Asiabut also North America as well. Aberdeen has a strong presence forother assets classes in North America but we don't have a propertyplatform there yet.” Would the group look at a manager acquisitionthere? “It's really a case of looking for opportunities that fitsthe existing business,” he says. “Beyond Europe the opportunitywould probably be to buy somebody or work in collaboration with alocal manager. As far as Europe's concerned it's more an organicstrategy because of the business we've already got.”

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AllanSaunderson is a managing editor of Property InvestorEurope and a contributor to GlobeSt.com.

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