Inside Embattled Abrdn’s 5-Star-Rated Trust

In this series, we ask leading fund managers about everything from their investment strategy, to role models, their views on crypto, and what they’d never invest in

Marina Gerner 2 September, 2022 | 2:22PM
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Abrdn has not enjoyed a positive run of publicity of late, but the company does actually have a 5-star Morningstar-rated trust. In our regular short profile, we ask senior investment director Alan Gauld from Abrdn Private Equity Opportunities Trust (APEO) to defend his strategy, and what he'd never invest in. 

Which Sector Shows The Biggest Promise in 2022?

Energy has had a successful 2022 so far, but we tend to shy away from sectors that are directly linked to commodity pricing. We like sectors that are supported by structural, long-term trends, so there may be a case that certain areas of technology and healthcare sectors are oversold, and provide an interesting entry point right now, given their long-term growth potential.

What's The Biggest Economic Risk Today?

An escalation of the conflict in Ukraine would have enormous human consequences and would have a disastrous impact on the global economy, exacerbating already challenging energy and food pricing, supply chain issues and, ultimately, inflation.

Describe Your Investment Strategy

We partner with a small group (c. 15) of the best private equity managers, principally in the European mid-market, to build a well-diversified portfolio of private companies (>600). We invest through funds and direct co-investments.

Which Investor Do You Admire?

I have always admired Sir Ronald Cohen. He was at the forefront of European private equity as co-founder of Apax Partners and, when it was his time to retire, facilitated an orderly succession, which isn’t always straightforward in private equity partnerships. He has since help spearhead efforts in establishing the private equity impact space.

Name Your Favourite "Forever Stock"

I’m going to ignore public stocks and go for a private company in Visma. It is a cloud-based ERP software provider in the Nordics and Benelux, and we are investors alongside the lead investor Hg. It has been in our portfolio for around 15 years, one way or another, and I believe it has grown revenue in every quarter during that time. It is deeply embedded in the day-to-day operations of over a million Small Medium Enterprise (SME) customers; it would literally be one of the last things a customer would stop paying for, probably just before its electricity bills! It’s also an M&A machine and this, along with the continued adoption of cloud-based ERP software, gives it growth potential.

What Would You Never Invest In?

The abrdn Private Equities Opportunites Trust (aPEOT) has never, in over 20 years, invested in companies with exposure to tobacco, pornography and weaponry, and that won’t change. There is a strong ESG consideration in everything we do nowadays, so any private equity firm we partner with or company we invest in would have to share that focus.

Growth or Value?

At risk of being accused of fence sitting, we aim to provide a diversified and balanced portfolio by sector, geography, maturity, and investment strategy, so we have no clear long-term preference. Clearly the last decade was great for growth, and it looks like now it’s a market for value. In the future, we are likely to focus a bit more on value, but we don’t try to time the market. We place more emphasis on diversification and partnering with the best private equity firms.

House or Pension?

With the cost-of-living squeeze, people are starting to reduce contributions or opt out to their pensions. It’s an important investment and shouldn’t be forgotten. But, for someone that just bought a family home, I’m going with the former! It puts a roof over your head!!

Crypto: Brilliant or Bad?

The blockchain technology is brilliant but, as an investment without a physical asset or yield, crypto relies on continued growth in investor sentiment and demand. The environmental impacts of the data mining also need to be seriously considered. I do, however, think there is a case to have a small amount, say 5-10 percent, of your personal portfolio in crypto as a higher risk investment. It won’t be something we do in the trust though!

What Can be Done to Increase Diversity in Fund Management?

I have seen great progress in private equity in the last five to 10 years, with industry bodies like Level 20 helping drive change. In private equity, there has been a strong recruitment drive for more diversity at the junior level. Whether they can maintain that level over time, as people gain experience, progress through the ranks and personal circumstances change, depends on how serious the employers are about a cultural commitment to D&I.

Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?

Our influence is more at the level of the private equity firm we partner with on an investment rather than portfolio company management. I’m proud of our engagement on ESG with our private equity managers. 10 years ago, very few private equity firms even had an ESG policy. For example, a Spanish-based private equity firm we work with didn’t even know what ESG meant when I initially raised it with them eight years ago. Now they have embraced it culturally, are PRI signatories and driving real ESG change in their portfolio companies. That’s gratifying.

What's The Best Bit of Advice You’ve Ever Been Given?

There is an opportunity to learn something from everyone you work with.

What Would You Be if You Weren’t a Fund Manager?

I have no idea; I think my best footballing days are well behind me. I like the outdoors and being around nature. So, something that combines that with an early start and is sport-related. Golf course greenkeeper?

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Marina Gerner  is a freelance journalist

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