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It has been an excellent year for Aberdeen (LSE:ABDN). The Aberdeen share price is up 34% over the past year, easily outstripping the broader FTSE 250. There are many reasons why someone might expect the rally to keep going, but here’s one key factor that I’m not sure is getting much attention.
From preservation to growth
Over the past few years, with the pandemic, I believe many investors have focused on protecting their capital and financial assets. Therefore, the stocks purchased and the amount of money invested in the market versus being held in cash were more conservative. Yet over the course of 2025, I feel this has shifted.
We’ve seen AI as a key theme that is causing even large-cap stocks to soar in value. For example, Nvidia is up 47% over the past year, despite being the largest company by market cap. Even here in the UK, the FTSE 100 has broken to fresh highs on several occasions.
If we set stocks aside, commodities such as gold have skyrocketed higher. With interest rates being lowered in the UK, it doesn’t pay as much to leave money in a cash account. The bottom line for me is that people are looking to invest more and are being more aggressive in buying stocks. I expect this trend to continue in the coming year.
How this helps Aberdeen
Aberdeen is well placed to take advantage of this continued shift in investor sentiment. It owns Interactive Investor, which is a retail trading and investing platform. It earns money from fees and commissions, so more activity from clients will boost revenue.
Further, assets under management (AUM) at a group level should also increase, as funds look to grow their exposure to the stock market. The firm earns management fees as a percentage of AUM, so as both market values and inflows climb, revenues and profitability naturally improve.
In short, better investor sentiment makes Aberdeen’s core businesses more profitable. If it translates to higher earnings, the share price should mirror the increase. After all, the price-to-earnings ratio is 13.62, which is below the FTSE 250 average. Therefore, it’s not overvalued and is unlikely, in my view, to suffer a sharp drop solely based on valuation.
Risks to note
Despite all this optimism, there are points to remember. For example, the wealth management space is becoming increasingly competitive. There are even robo-advisers to contend with! This can act to compress profit margins as the fees charged drop because investors can shop around more for the best price.
The asset management industry is under increasing scrutiny, with factors like ESG, disclosures, and operational resilience. Aberdeen faces higher compliance costs, and any lagging digital transformation may make cost-control harder.
Even with this, I think the stock could do well going forward and so I think it’s worth considering by investors.
This story originally appeared on Motley Fool
