Clock is ticking for Aberdeen to turn Swip funds around

John Kenchington

Aberdeen Asset Management is still wading through the dizzying range of funds it picked up in its acquisition of Scottish Widows Investment Partnership (Swip) last year.

The complicated job of shifting all of Swip’s assets into Aberdeen’s existing ICVC fund umbrella is taking time to resolve but it seems to be on track for completion by the end of this year as planned.

The Swip deal was completed in early May 2014. Since then Aberdeen has taken the axe to a number of Swip employees and renamed the fund range. It is now set to complete a series of asset switches in June.

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The old Swip UK ICVC that is being dissolved has some 65 share classes in it, all of which will have investors who will need to be consulted and advised of all the various changes.

Aberdeen has taken the opportunity to quietly merge the atrocious Swip UK Equity Dividend fund into one of its existing funds as part of the move. The product, now called Aberdeen UK Equity Dividend, has lagged the market by 166.9 percentage points since 1995.

Aberdeen is looking to the Swip acquisition to give it a stronger footing in developed-world markets to offset the haemorrhaging of cash from its traditional Asia-focused funds. Earlier this month in interim results the group suggested these effects were already being seen.

But the concern of many retail investors about the old Swip funds was always that fund manager turnover was high and performance was inconsistent at best.

We’re 12 months on from the acquisition so it seems like a good time to find out if Aberdeen’s crack team has managed to turn things around on the Swip funds.

At this stage, things still appear to be a bit of a mixed bag.

According to FE Analytics, European Property Share has put in a solid 12 months and Corporate Bond is second quartile.

But World Government Bond is third quartile, and languishing in the bottom quartile is Global High Yield Bond, Foundation Growth, UK Enhanced Equity and UK Equity Dividend. At least Aberdeen has a similar product into which it can merge the latter away.

At this point last year, while still under Swip control, the situation on the funds looked much the same, with four ranking bottom quartile for trailing-year returns.

No dramatic turnaround yet, at least on the UK retail funds, then.

It is of course early days, and Aberdeen has a lot on its plate – Swip had hundreds of institutional and multi-manager funds, in addition to the UK retail portfolio, that all must be sorted.

But if this core range of UK-based developed-market funds is going to start appealing to the retail market, then the clock is ticking for a performance turnaround.

John Kenchington is editor of Investment Adviser