CNBC News Releases

CNBC Transcript: Martin Gilbert, Chairman of Standard Life Aberdeen

Below is the transcript of a CNBC Exclusive interview with Standard Life Aberdeen Chairman Martin Gilbert. The interview was first broadcast on CNBC's Squawk Box Asia on 23 September 2019. The interview took place at the Singapore Summit. If you choose to use anything, please attribute to CNBC and Amanda Drury.

Amanda Drury (Mandy): What a pleasure to have you with us today. Thanks.

Martin Gilbert: No problem.

Mandy: There's been lots of speculation in the press about whether or not you were on the verge of leaving the company three decades ago. Can you confirm are you staying or going?

Martin: Well I don't know it's not my decision or as you know. That's always a board decision and I'm sure once they decide what my future is they'll announce it. But I think the thing that surprised me was I knew I was the longest serving CEO. But what I didn't know I was the second oldest so that's what surprised me the most. But so I think I've done my bit. So you know at some stage will announce succession and so on.

Mandy: Are you in the middle of forming a succession?

Martin: You know what the board are always looking at succession. They're looking at succession at all levels of the business. But look I'm looking forward to doing something else at some stage in my career. So yeah we'll just wait and see.

Mandy: The name that came up is becoming the chair of digital bank Revolu. Is that something that you are actively looking at?

Martin: Yeah I mean again you know if there's anything to announce I'm sure they will. But to become to become a member of a board of these sort of businesses regulated businesses you've got to go through all sorts of interviews with the regulators et cetera. So again I don't want to prejudge whether I'll be joining that board or not. It's always dangerous to say you're going to do something that's subject to regulatory approvals etc.

Mandy: And what would be an ideal job?

Martin: I don't know. Managing Manchester United would be my ideal job or I would always want to be a pilot. So one of those would be the ideal.

Mandy: A pilot?

Martin: Yeah I'd love to have been a pilot. I think I don't know what it is it's almost too late. So you know I'd like to add that it would have been my dream job.

Mandy: And what do you say to the people who say that maybe you have been wearing too many caps?

Martin: Yeah I think I mean I was I got caught as you probably know last year and in a position of being the deputy chairman of Sky and fully expecting the bid process to last as most bid processes do six months or nine months and instead it lasted almost two years. So I stepped temporarily as you know off the Glencore board at that at that time to work to make sure the bid for Sky was completed. An as you know we've got a we've got about 110 percent premium because we were we were fortunate enough or rather the shareholders were fortunate enough to have two buyers and so for us it's always great if you've got two people wanting to buy a business and as you know Comcast came in and bought the business and I think are very very good owners of the business. So again once that was done I stepped back onto the Glencore board. So Glencore would be my main quoted company board that I'm allowed to do.

Mandy: But nonetheless it's done. It's easy for the criticism to be louder at the time that you're seeing outflows from SLA the share price performance hasn't been I'm sure you would like it. So do you feel able to focus enough?

Martin: Yeah I do yeah. I mean I think you know it's obviously recovered strongly in September after the results. But what we've seen I'm sure you know in the asset management business there are some significant headwinds that the business is not. The industry is suffering and we're just the same as any of the other businesses at any of the other quoted companies. So we've got this we've got this big move from active equities to passive equities and you probably saw yesterday in fact might even have been on CNBC that the passive equities are now bigger than active equities. We've also got these big moves from public markets to private markets and a lot of fee pressure in the industry. So the industry itself is going through a really structural change. I think at the moment.

Mandy: You feel it's an industry problem and not an SLA problem.

Martin: It's definitely an industry problem. I mean don't get me wrong we did have performance issues until about 18 months ago but we've had very strong performance in our funds since then. So it's not a performance issue per se with us it's definitely these industry headwinds that the whole industry as it is seeing.

Mandy: We take a look at some of the numbers here so outflows 26 consecutive months basically since Standard Life merged with Aberdeen. You don't feel that this is a confidence vote in the board itself.

Martin: No no in fact quite the reverse. I mean I think it's as I said a lot of it is the structural issues plus of course we did have performance issues up until about 18 months ago. But we've seen since then seen a very strong rebound in performance as quality stocks have recovered. But as I say look the interesting thing is in the industry if I speak to my colleagues in the US the markets are at record highs. The share prices are at outright lows and morale within asset management CEOs is a sort in a very bad place. Just because we're being killed by this active to passive shift.

Mandy: So what can you do actively to mitigate these challenges and stem the outflow?

Martin: Well I think the outflows I mean well two things we need to perform so active fund managers need to show that they can outperform the passive funds and for the last sort of three four or five years passive about performed active is now coming back once we're seeing these difficult markets. The other thing about asset managers is we've always been profitable. It's been a very profitable business to be in and now that we're seeing these structural headwinds we're having to make our businesses more efficient which we've never had to do so. So a lot of streamlining trying to trying to make the process from when an order or as a fund manager wants to buy or sell a stock or a bond make that much more efficient through the stages after that. So really those are the two things perform and make your business more efficient.

Mandy: Before we move on to the exciting issue of Brexit and others do you feel a couple of years on the merger was the right decision.

Martin: Oh I mean undoubtedly I mean we would both have been in a difficult more difficult position than we are. Our rather the industry is if we hadn't if we hadn't done the merger and we're sitting here with four or five billion of value on our own balance sheet which gives us the fortunate position of being financially strong and able to prepare ourselves for a much tougher industry going forward.

Mandy: Do you feel that Brexit has changed towards Scottish independence?

Martin: Definitely Scotland voted. Scotland voted overwhelmingly two thirds I think 60 66 percent yes. So that's two thirds to remain. And I think I think people in Scotland would have preferred to stay as a member of Europe.

Mandy: Do you think the EU has more sympathy now watching the Brexit more sympathy for this Scottish independence cause?

Martin: Well I think I'm not sure it does. But I think that the signs coming out of Europe now are much more conciliatory towards the negotiations. So we're definitely seeing a change in mood. I think people are now are really now trying to find a solution to this Irish backstop issue.

Mandy: Do you think that they will find a solution?

Martin: Yeah I do. I think for the first time I really sense that people are really trying to find a solution now technically whether it's possible to find a solution. It's not a subject that I can give an opinion on but I think there is a desire now to find a solution and definitely the tone coming out of Europe is far more let's try and find a solution to this Irish backstop.

Mandy: You said another Brexit referendum that would be quote dangerous for the UK do you still believe that?

Martin: Yeah I think so. I mean I think an already sort of divided public would be I think it would be very tricky to have another referendum I think. I think the opinion would be very much more divided the next time.

Mandy: That was going to be my next question do you feel that the will of the people has changed. Meaning if there was a referendum that would actually result in more people wanting to remain?

Martin: Look I don't know what the results if there was a second referendum would be but I think the there is an overwhelming opinion that the decision is made. We just really need to deliver it. And certainly from business's point of view we just want something to happen and just get the uncertainty over because as you know the financial services is very well prepared for Brexit. We've all set up. If we needed subsidiaries in Europe, we've set them up. If we needed to move people that moved. But the numbers being moved are very very small.

Mandy: So you set up a subsidiary in Dublin already?

Martin: Yeah yeah.

Mandy: You and the management would be ok even in the case of a hard Brexit?

Martin: Yeah. Exactly. Yeah. No I mean we're prepared for the hard Brexit although we would we would prefer an easier Brexit. But the asset manager industry is well prepared in fact really the asset management industry was structured that it had Luxembourg as its main operations in Europe. So in the funds business we always had Luxembourg and London. And so it was we really didn't have to change anything at all. Basically we had set up a Dublin subsidiary which we've done and we've moved. I think one or two people over that. So again the numbers moving have been very very small.

Mandy: You sound quite sanguine. So do you feel that all the hand-wringing about the economic chaos that you see with Brexit is overdone?

Martin: I don't think it is overdone in the supply chain. I think we've got to be prepared on the supply chain and I think we are getting prepared. So I think that's where the if there are issues that's where it will we'll be. So I hope that all the money that's been spent trying to trying to make that work does work. But I mean in this day and age it should be logistically possible to move goods by plane or whatever it is if it's absolutely necessary.

Mandy: Just a quick foray back to the Scottish referendum question. Would you support that?

Martin: I think look we've had a referendum in in the past. You know the result is the result. Let's see what happens with Brexit I think before we see whether the government there wants another referendum or not.

Mandy: Do you think would even be winnable without some kind of indication from the EU that they would welcome Scotland?

Martin: I think I mean I think if the well if I turn the question around the other way if the EU said that Scotland could be a member of the EU, I think I think it could be it would be a very very interesting referendum at that at that point.

Mandy: Are you more or less optimistic about the future, about Boris Johnson?

Martin: I'm pretty optimistic. I mean you know if you're a fund manager you've got to be optimistic. I think you know what I've learnt is that economies have their own sort of momentum and so on. But certainly the economy is doing fine. And in the UK I think employment's OK. It seems to still be it still seems to be going on reasonably well.

Mandy: It's been said that you have a direct line to Mr. Trump in the United States. He was saying yesterday that he feels he's winning the US-China trade war and that he's not in any hurry even to get a deal before the election next year. If you could use that direct line, what would you say to the President?

Martin: Well I don't have a direct line to President Trump. I knew him before he became president but obviously once he became president he became far too important to speak to people like myself. But yeah I think it goes slightly deeper than just President Trump. This trade war. And I think that's what's going to make it more difficult to resolve I think than just him sorting it out because as we know he likes to reach. He would like to do a deal I suspect but I suspect it goes further down in the organization. Now it goes down further in the government and I think that's going to be the big issue facing the facing the global economy at the at the moment.

Mandy: So you feel like we could be talking about this next year

Martin: Yeah I think well I definitely think that we will still be talking about aspects of the trade war this time next year. There may be some small parts of it resolved or whatever but I still think I still think that this is this is bigger than just selling US grain into China. I think it's also a technology war. I think it goes deeper in the US administration than just Trump.

Mandy: So you've been in the business for a really long time. You've got the wisdom you've got experience when you look around the world and all the things we do wring our hands over now like trade wars like Brexit like climate. What's your biggest worry?

Martin: I mean it's always some big geopolitical event although the world keeps shrugging them off. I mean I'm obviously getting too old because I'm sort of nervous about markets and I think that's the good. The only good thing is everyone is nervous about markets. So no one is saying markets I bond markets or equities or real estate are raging buys everyone is sort of cautious on the level of level of markets.

Mandy: What is it in particular that worries you? Do you think we're headed for a major correction?

Martin: No. What geopolitical. Obviously some big geopolitical event a bit like the Saudi oil event. I mean that that could have it could have been much worse and raised oil prices dramatically. I think we're definitely seeing a slowdown in the world economy. I mean China has some people here are talking about China growing at 3 percent 4 percent which is still good by the way I mean by most start by most people's standards India is still doing okay. So I mean we're. I mean it's not bad. All we're seeing is a slowdown which is maybe a good thing I mean and rather than this just this rapid growth that we've seen over the last few years.

Mandy: So what do you think the markets will look like in 2020? What kind of year we would end up with? Remember this time last year seems to be chugging along and then it turned pear shaped.

Martin: Yeah. Yeah. Yeah I mean yeah I'm hopeless at predicting markets but I as I say look I'm reasonably happy with the levels they are. I mean to a certain extent what else are you going to do with your money. That's the big issue that that people have. So they've been people have invested in bonds at 0 percent and equities look better value but of course if you want protection you buy a government bond, emerging market bonds are doing 6 7 percent so as long as you're prepared to take a bit of currency risk there you're okay. Real estate is expensive by historical standards but still giving a reasonable yield. So it's really tough for the big asset owners at the moment where to put their money which is why the shifting them out of public markets into private markets and buying airports and toll roads and these sort of assets which are giving uncorrelated theoretically uncorrelated return to bonds and equities.

Mandy: My last question since you raised the issue of India you might have noticed how much the markets cheered Prime Minister Modi's corporate income tax cut. And I think you've sold recently just a small one percent stake in a JD in India. Are you perhaps feeling a bit more optimistic about the Indian market after this move by Modi?

Martin: Yeah I mean look India's fantastic. We are so fortunate that our forefathers and Standard Life Aberdeen invested some money and these two joint ventures we have in India with HDFC. It's been a phenomenal success and really we've been so fortunate and having these investments but we're divesting slowly from them to reinvest and in obviously the core business. But I am confident in India that some great companies there that well-run we're one of the biggest foreign investors in India as well as having these joint ventures in India. So we'd like the Indian market. It's expensive though. Everything's expensive.

Mandy: Everything is expensive. Where is the most expensive place right now?

Martin: Oh everything's expensive. I think government bonds. Difficult to justify investing unless you've got unless you've got a I'm speaking about developed market government bonds here are pensive unless you've got you've got to match a liability or feel very negative about the world.

Mandy: Negatives trillions of dollars and negative yielding government bonds. Is it going to end badly?

Martin: Well we've had you know when I first when I first started in the business the UK government bond was yielding 18 percent and it's now probably yielding whatever one or whatever. So it does show we've had this phenomenal fixed income bull market for 30 35 years. So we I mean it's whether this is the new it's whether this is normal markets or whether we see a bit of a correction in markets which I think we must see a correction bit. But I've been completely wrong about interest rates. They've remained low for far longer than I or anyone else thought and I think they're going to remain low for longer now in the future as well you know.


Media Contact:
Clarence Chen
Communications Manager APAC, CNBC International
D: +65 6326 1123
M: +65 9852 8630

About CNBC:

CNBC is the leading global broadcaster of live business and financial news and information, reporting directly from the major financial markets around the globe with regional headquarters Singapore, Abu Dhabi, London, and New York. The TV channel is available in more than 415 million homes worldwide. is the preeminent financial news source on the web, featuring an unprecedented amount of video, real-time market analysis, web-exclusive live video and analytical financial tools.

CNBC is a division of NBCUniversal. For more information, visit