How do Trump, tariffs and taxation define investors future? While the raging debate among the hardcore investment community is about a ‘passive’ or ‘active’ management strategy, one of Scotland’s biggest names, abrdn, made an active decision to change its name to Aberdeen.
It ends four years of ridicule over a re-branding which harmed the Edinburgh company’s reputation.
More recently, Aberdeen Group plc, a FTSE 250 fund manager, has named Siobhan Boylan as chief financial officer, and a successor to Jason Windsor who stepped up to chief executive last year following the sudden departure of Stephen Bird.
Windsor said the name change was aimed at “removing distractions” – and a new phase for the company as it bounced back into profitability.
While the name change is a sideshow, Scotland’s staid investment community does not like controversy. It much prefers to get on with its knitting away from the spotlight, but there have been several turbulent years.
When Greta Thunberg began her environmental beef about Baillie Gifford supporting the Edinburgh Book Festival in 2023, the fund manager withdrew its backing, much to the dismay of literary types who had welcomed the support.
The big questions which dominate the industry are: how can active fund management offer value as passive investing rises? And, more significantly in a world of generative AI, does active still have a role in an increasingly passive world?
Moreover, US President Donald Trump’s protectionist measures, including proposed tariffs on imports from Mexico, Canada, and China – along with threats that the European Union may be next – have fuelled concerns over a potential trade war. Trump, tariffs and taxation define investors future.
Other factors, such as shrinking public market opportunities in Britain, access to new growth areas for infrastructure, renewable energy and AI, and the pursuit of higher returns, is driving fund managers – particularly in Scotland – towards investments in hedge funds and private equity.
The contraction of the London Stock Market, precipitated by a significant number of companies delisting due to takeovers, relocations, administrative burdens, failure to meet compliance requirements and rising costs, as well as liquidity issues and weak trading volumes, has led to a net reduction of 115 firms. The number of listed companies fell below 1,000 by the end of December 2024.
No resting on laurels
Scotland has long been an established player in the global fund management industry, with Edinburgh remaining the UK’s second-largest investment management centre outside London. As of 2024, Scotland’s financial services sector, encompassing fund and asset management, contributed approximately 10 per cent to the nation’s economy, equating to almost £14.8bn in gross value added. With year-on-year growth of 3 per cent, the industry remains vital to the health of the Scottish economy.
A massive amount of expertise in investment trusts remains embedded in Scotland
In 2023 alone, Scotland secured a record 142 inward investment projects, a 12.7 per cent increase from the previous year. Consequently, the industry has added approximately 13,000 high-skill, high-wage jobs in recent years while attracting significant foreign direct investment.
Major asset management firms in Scotland, including Baillie Gifford and Aberdeen, have been driving this year-on-year growth, each with a distinct legacy of innovation.
For example, Baillie Gifford gained prominence for backing tech giants such as Amazon, Tesla and Zoom, while Aberdeen leads in sustainable investing and ESG (environmental, sustainability and governance). Together, they reinforce Scotland’s role as a centre for investment expertise and cutting-edge financial strategies.
Baillie Gifford’s active strength has been its wide range of global investment trusts, such as the Japan Trust plc, investing in Japanese and Asian companies, such as Sony, FANUC, a factory automation manufacturer, and Sumitomo Mitsui Trust Bank, and the likes of the Scottish Mortgage Investment Trust, with holdings in semi-conductor firms, NVIDIA and ASML, a Dutch manufacturer of lithography equipment.
However, the tectonic plates of investing have been shifting.
The competition is from the United States where fund managers increasingly promote passive investing strategies, challenging Scotland’s traditionally strong active management sector.
Vanguard, a major US-based player best known for pioneering low-cost index funds and exchange-traded funds (ETFs), has announced fee reductions across 87 of its funds.
These fee cuts, applicable to both mutual funds and ETFs, came into effect in February, marking the largest fee cut in the company’s history. This move is expected to attract a larger client base and increase assets under management, saving investors approximately $350m a year.
Investors seeking lower costs are being drawn to passive strategies from major players such as Vanguard, and this is putting pressure on Scotland’s actively managed funds. Over the past decade across the UK, only 32 per cent of active equity managers have surpassed passive funds, a drop from 56 per cent in previous assessments. This suggests a significant proportion of active fund managers in the UK have struggled to outperform passive alternatives.
Investment houses such as Baillie Gifford, Aberdeen and Walter Scott & Partners, have traditionally specialised in active management and high-value investment strategies.
“We may start to see greater demand for lower-cost products within the UK, forcing Scottish fund managers to innovate in alternative fee models, hybrid active-passive strategies, or enhanced client services to remain competitive,” said one fund manager who spoke to The Business.
The flow of money to passive funds from investors in the UK reached new heights in 2024
According to Scott White, former head of communications at Standard Life and Aegon, “Vanguard’s unparalleled cost efficiency, underpinned by global scale and an impressive track record, delivers fees that even London-based companies struggle to match. Investors therefore view it as a safe haven for capital.”
Fortunately, Scotland is at the forefront of sustainable investing, and a shift towards high-conviction, active management strategies is viewed as a way to retain investors looking for more than lower costs.
However, mid-sized or boutique Scottish fund managers who have enjoyed success in their niches may find it difficult to sustain growth and struggle to compete on price against larger counterparts.
Cornelian Asset Management has been taken over by Brooks Macdonald, now with offices in Edinburgh, while Artemis has undergone change as its co-founder and chairman John Dodd retired at the end of 2024. Dodd set up the firm in Edinburgh with Mark Tyndall, Derek Stuart, and Lindsay Whitelaw in 1997.
A sore recovery from the 2008 crash
Since the 2008 financial crisis, Scotland’s global fund management prominence has faced strong headwinds, propelled by shifts in regulatory markets, evolving investment strategy trends, and prominent mergers.
“The financial crisis unmasked practices that had been deteriorating profitability even before the crash, revealing glaring gaps in governance. Cities such as Edinburgh felt left behind, with trust in local financial giants rapidly eroding under the weight of their flawed oversight,” says White.
The aftermath brought a tightening of regulations. For Scottish firms, the introduction of frameworks such as MiFID II and Solvency II brought better transparency and risk management requirements. While this increased administrative expenses, it helped rekindle the industry’s credibility. This helped rebuild investor trust and allowed Scotland to regain its position as a stable and well-regulated financial hub.
Meanwhile, the crisis triggered the rise of passive investing. The growing demand for lower-cost, market-tracking funds forced active managers to refine their approaches, focusing on high-conviction, specialist strategies to justify their fees.
The flow of money to passive funds from UK investors reached new heights in 2024, showing they took in £29.6bn. Meanwhile, actively managed funds saw outflows of £2.4bn, according to data from Calastone.
“These figures demonstrate the diverging fortunes of both sectors. As a result, many active fund managers have struggled and you see that reflect in many of their own share prices,” says John Moore, senior investment manager at wealth manager RBC Brewin Dolphin.
He believes there should be room for both passive and active in a well-balanced portfolio.
“While it has been notoriously difficult for active managers to beat the market in the likes of the United States, in other areas – often where there is more opportunity for price discovery and local knowledge can go a long way – they have performed better,” he adds. This environment has led to the development of Scotland’s expertise in long-term, research-driven investment approaches, with firms such as Baillie Gifford, with a roster of investment trusts, carving a niche in high-growth equities and thematic investing.
Reasons to be cheerful
The Scottish Financial Enterprise’s Growth Strategy strives to double assets under management to £1tn by 2030, positioning the financial services sector for significant growth.
As part of Scotland’s competitive edge to attract international investment, several structural advantages continue to fuel its ability to make this achievable.
First, Scotland maintains a diverse financial base, with Edinburgh and Glasgow leading the way. Edinburgh excels in banking and investment management while Glasgow has built a strong presence in insurance, asset management, and legal services.
This diversification strengthens global resilience and competitiveness, ensuring the sector is well-positioned to respond to market volatility.
Jason Windsor said the name change back to Aberdeen was aimed at ‘removing distractions’
Scotland’s political and economic uncertainty makes it less attractive
Contributing to Scotland’s resilience is its strategic positioning as a leader in sustainable finance. The United Nations’ COP26 in 2021 delivered the Glasgow Climate Pact Agreement, which promised more financial support for nations working to reduced greenhouse gases. With ESG a vital factor within regulatory frameworks, such as the Financial Conduct Authority’s Sustainability Disclosure Requirements, this has encouraged Scotland’s fund managers to actively incorporate ESG principles into their stock-picking strategies.
Despite Trump’s efforts to change the landscape, this is set to remain, as both institutional and retail investors prioritise sustainability in capital allocation.
Scottish firms have been proactive in adopting digital solutions, from automated portfolio management to data-driven investment analytics to improve efficiency and enhance client engagement and accessibility.
Initiatives such as the Financial Regulation Innovation Lab, launched by FinTech Scotland, are fostering collaboration between asset managers, fintech entrepreneurs, and regulators to drive innovation in risk management and financial technology.
Higher taxes threaten talent drain
The fund management industry thrives in environments which promote economic growth, investor confidence and favourable tax conditions. However, recent fiscal policies introduced by the Scottish and UK governments have been criticised for lacking pro-growth initiatives, and have the potential to damage Scotland’s fund management industry.
With Scotland’s GDP contracting by 0.5 per cent in November 2024, the Scottish Fiscal Commission forecasts a modest growth rate of 0.8 per cent in 2025. An increase in employer National Insurance contributions is effectively viewed as a tax on jobs, which could disproportionately affect businesses employing lower-wage workers.
In Scotland, the introduction of higher income tax rates for higher earners compared to the rest of the UK may over time contribute to the weakening of its position as a financial services hub.
A Scottish-based fund manager earning more than £125,140 a year hits a tax rate of 48 per cent, while the rate in the rest of the UK is 45 per cent. The tax differential means that a high earner in Scotland faces a 60 per cent tax rate due to the tapering of personal allowance.
The danger is skilled professionals may relocate to where tax rates are lower, and foreign firms considering expansion or relocation might avoid Scotland.
“The key driver behind the success of this industry in any jurisdiction boils down to investor certainty. Scotland’s political and economic uncertainty, marked by the ongoing independence debate, changes in government policy and concerns over rising employee taxation, makes it a less attractive destination for investors,” says White.
Fund managers operating across the UK tend to prefer UK Government’s regulatory authority rather than devolved administrations such as the Scottish Government.
“This perception arises from Westminster’s reputation for offering a more established, stable, and globally recognised regulatory framework, underpinned by a deeper understanding of political and market dynamics,” explains White.
Move towards hedge funds and equity
Increasingly, fund managers are turning to hedge funds and private equity to pursue enhanced returns. Investing in private markets also allows managers to capitalise on early-stage companies and technological innovation.
In 2023, private capital invested £731m in Scotland, backing 104 companies, with 93 per cent of these investments in small and medium-sized businesses.
The democratisation of financial risk within Scotland’s fund management industry is accelerating, driven by passive investing, private equity growth, and fintech advancements such as AI. Automated, algorithm-based investment strategies and commission-free trading apps, such as Robinhood and Freetrade, are lowering barriers to entry.
Initiatives such as the Scottish AI Alliance, a collaboration between the Scottish Government and The Data Lab, are enabling firms to integrate advanced analytics into their investment strategies.
“While AI-driven platforms are empowering a new generation of tech-savvy investors with unprecedented ease of access to low-cost options, they demand proven safety. The heightened regulatory burden that comes with increased automation means only firms with sufficient scale can truly deliver value in this evolving landscape,” believes White.
“Scotland-based fund managers may struggle to compete with global giants such as Vanguard, whose scale enables them to drive down costs more effectively than Scottish-based fund managers.”
In all of this, Scotland’s fund managers will need more than a change of name to stay ahead of the global pack.
Scotland’s Asset Management Landscape
Aberdeen Group plc, formerly abrdn
Assets under management/ or administration: £511.4bn
Jason Windsor is chief executive, and Siobhan Boylan is finance director. Aberdeen, based in Edinburgh, swung to a pretax profit of £251m in 2024 from a £6m loss in 2023. After tax, its profit was £248m, up from £12m. Assets under management and administration grew by 3.3 per cent to £511.4bn from £494.9bn. Outflows narrowed to £6.1bn last year from £13.9bn in 2023. Aberdeen Asset Management bought Scottish Widows Investment Management in 2014.
Phoenix Group, which owns the Standard Life brand
£289bn
Phoenix Group, based in London, is relevant for our chart because it owns the Standard Life brand, and its former assets are managed by the Phoenix Group. It is the largest savings and retirement business in the UK with 12 million customers. One of Phoenix’s pension funds is the Standard Life Smoothed Return Pension Fund, managed by the Fidelity Adviser Solutions platform. Andy Briggs, formerly with Scottish Widows and Aviva, is chief executive officer, while Stephanie Bruce, formerly head of PwC in Scotland, is the group CFO.
Aegon UK, part of Dutch company, Aegon Asset Management, with headquarters in The Hague
£265bn
Formerly Scottish Equitable Asset Management, Aegon Asset Management UK has an administration headquarters in Edinburgh Park. Shawn Johnson is CEO of Aegon Asset Management, Stephen Jones, is chief investment officer, while Kirstie MacGillvray, is CEO of Aegon Asset Management UK.
Scottish Widows, part of Lloyds Banking Group
£23bn
Schroders Personal Wealth is a joint venture between Lloyds Banking Group, owner of Bank of Scotland and Halifax, and Schroders, one of the UK’s largest asset managers. Schroders has £778.7bn under management. Chira Barua is chief executive of Scottish Widows and Lloyds Insurance, Pension and Investment business.
£226bn
Baillie Gifford is an independent investment partnership founded over a century ago in Edinburgh, owned and run by 58 partners who all work at the firm. Tim Campbell, Amy Atack and Malcolm MacColl are the three managing partners from April 2025. Campbell succeeds Andrew Telfer. Baillie Gifford now has 1,682 staff in Edinburgh, Amsterdam, Dublin, Frankfurt, Hong Kong, London, New York, Shanghai, Toronto, and Zurich.
£173bn
Royal London Asset Management was established in 1988 and is a wholly owned and central part of the Royal London Group, one of the UK’s largest mutuals. The company, with 8.7 million policies in force, has a strong presence in Edinburgh due to its ownership of the Scottish Life pension business. Chief executive officer is Hans Georgeson.
Walter Scott & Partners, part of BNY Mellon Investment Funds
$78.2bn
The Charlotte Square, Edinburgh, based fund manager is an independent part of the US-based Bank of New York Mellon. Alex Hammond-Chambers is chairman, while Jane Henderson is managing director.
Artemis LLP, co-owned by management team and Affiliated Managers Group
£28.3bn
Co-founded by John Dodd, Mark Tyndall, Derek Stuart, and Lindsay Whitelaw in 1997. Founded in Edinburgh, with offices in Melville Street. Now based in London. The assets of Artemis Alpha have been combined with those of the Aurora Investment Trust, managed by Phoenix Asset Management Partners in Barnes in London. Kartik Kumar – co-manager of Artemis Alpha and manager of the Artemis European Select Fund – has joined Phoenix Asset Management. Artemis will no longer be an investment trust provider.
Martin Currie Global Portfolio Trust, owned by Franklin Templeton
£16bn
Franklin Templeton has global assets of $1.6tn. In Edinburgh, Christopher Metcalfe, is chair of Martin Currie board, while Gary Le Sueur, chair of remuneration committee, with Marian Glen, and Lindsay Dodsworth, board directors. Portfolio manager is Zehrid Osmani.
Asset Management Services
Morgan Stanley Investment Management
$1.7 trillion in assets under management or supervision worldwide
Morgan Stanley, the New York based financial powerhouse, has more than 1,400 investment professionals around the world, including several hundred based in its Glasgow centre, which supports its financial technology and the custody of assets.
$43.7 trillion in assets under custody and/or administration and $4.1tn in assets under management
Custodian offices and fund management back office services in central Edinburgh.
$10 trillion of client assets
One of the world’s leading financial organisations has over 1,000 back office and custodial staff operating in Edinburgh and Glasgow. It is also one of the company’s AI hubs.
$4 trillion of assets under management
JPMorgan Chase opened its new technology home in Argyle Street in Glasgow last April. The firm employs 2,600 people in Glasgow and is a significant employer in Edinburgh, where the firm has 1,400 employees. Businesses operations in Scotland include private bank, payments and post-trade securities services.
Read more on Trump, tariffs and taxation in a new article by Clare Reid, Sales boost hit as confidence wanes over Trump tariffs.