Aberdeen Standard Investments  

Aberdeen Standard plays down loss of £109bn of assets

Aberdeen Standard plays down loss of £109bn of assets

The sudden withdrawal by Lloyds Banking Group of £109bn of assets from Aberdeen Standard Investments won't have a significant impact on the business, according to the Scottish fund giant.

As FTAdviser previously reported, Lloyds Banking Group has served notice to Aberdeen Standard Investments that it is terminating the fund management contract the firm has with the Scottish Widows insurance business, owned by Lloyds.

The contract was originally with Aberdeen Asset Management and contained a clause stating that in the event of a change of ownership at Aberdeen, the investment contract could be terminated with one year notice.

Standard Life Aberdeen was formed in August 2017 from the merger of Standard Life and Aberdeen Asset Management PLC. The brand for the merged investment businesses of Aberdeen Asset Management and Standard Life Investments was named Aberdeen Standard Investments.

FTAdviser understands that Lloyds decision to remove the mandate is linked to the fact that by combining with Standard Life, Aberdeen is now part of a competing firm to Scottish Widows, as both companies have insurance businesses.

The £109bn of assets it has lost represent about 16 per cent of the total assets under management of Aberdeen Standard Investments, but the company are keen to point out it represented only 5 per cent of revenue.

The company’s joint chief executive Keith Skeoch and Martin Gilbert said: "We are disappointed by this decision in the context of the strong performance and good service we have delivered.

"We will be discussing the implications of this with Lloyds and Scottish Widows."

On the day of the announcement Aberdeen Standard Investments share price fell by as much as 9 per cent.

Since then Aberdeen Standard Investments has distributed an analysts note to journalists.

The note is from Bernstein, a sell-side research company, which said the fall in the fund house's share price represented an opportunity.

Bernstein stated Aberdeen Standard Investments was earning 0.13 per cent for managing these assets, compared with a margin of 0.33 per cent on the rest of its assets, meaning the impact is likely to be limited as the company will be able to reduce costs to make up for the lost revenue.

Aberdeen Standard Investments shares had been performing poorly for the past year, down from £4.20 on 19 February 2017, to £3.77 on the same day this year.

The shares were £3.90 the day before Lloyds made the announcement that it was terminating the fund management agreement.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "This is a blow for Standard Life Aberdeen, but has been on the cards ever since the merger.

"Standard Life and Scottish Widows are long standing rivals, and the prospect of one group managing the fund range of the other was never going to sit entirely comfortably in the corridors of power in Edinburgh.

"Losing this book of business would strike a sour note for the Standard Life Aberdeen merger, and undermines some of the rationale for joining forces, which was built on scale.