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Home > Investments > Alternative Investments

Standard Life: Libor scrapping would not affect Gars fund

Manager of the £11bn Standard Life Global Absolute Return fund says benchmark change will not affect fund’s process.

By Bradley Gerrard and John Kenchington | Published Aug 13, 2012 | comments

Standard Life Investments has said its giant Global Absolute Return Strategies (Gars) fund will continue unaffected even if Libor is scrapped.

The fund is one of the biggest ‘absolute return’ products that uses six-month sterling Libor - a measure of interbank lending rates - as a benchmark for its performance.

But Libor’s credibility has been called into question after Barclays was fined £290m by US and UK regulators for attempting to manipulate the rate, and a series of other banks are being investigated over the issue.

Last week FSA head of conduct regulation Martin Wheatley suggested that Libor could even be scrapped entirely and replaced with a borrowing rate based on actual trades.

“Gars funds aren’t benchmark driven so whether we used Libor or any other recognised measures, such as sterling overnight interest rate, it would not impact on how we invest the funds,” a Standard Life Investments spokesperson said.

“We are not trying to replicate Libor. Gars funds are not bank accounts - we are looking to beat Libor by 500 basis points.”

The group added Gars has “consistently and comfortably” outperformed its target of Libor plus 5 per cent over a three-year period.

Fund management trade body the IMA said it “fully supported” the need to maintain market orderliness if Libor was to change.

“It is critical for the fund management industry that all indices are well governed and reliable,” a statement said.

“We will be engaging with our members and submitting a response to Martin Wheatley’s consultation. We’re pleased to see that legal issues with existing contracts are being considered and we trust that asset managers will not be overlooked in this regard.”

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