New blow for Aberdeen Standard as it loses £286m SJP mandate

New blow for Aberdeen Standard as it loses £286m SJP mandate

The upheaval at Aberdeen Standard Investments continues as the fund giant has lost the mandate to run the £286m St James’s Place Ethical fund.

In its latest fund shake-up, St James’s Place announced plans to rebrand the Ethical fund to the Sustainable and Responsible Equity fund, and changed the manager from Aberdeen Standard Investments to boutique provider Impax.

Announcing the change, SJP's chief investment officer Chris Ralph said Impax had a "differentiated" offering.

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Aberdeen Standard Investments declined to comment on the loss of this mandate.

This is the latest institutional mandate to leave the company after the decision of Lloyds Banking Group to withdraw £109bn of Scottish Widows assets in February after concluding that by merging with an insurance company in Standard Life, Aberdeen had become a competitor business.

Aberdeen Standard Investments has disputed that Lloyds Banking Group has the right to withdraw those assets, and has downplayed the impact it will have, saying it represents only 4.4 per cent of its total fee income.

Meanwhile the Global Absolute Returns Strategy (Gars) fund has continued to shrink in size. It had assets of £26bn in October 2016 but the latest data from FE Analytics showed that at the end of May the fund had shrunk to £17bn.

The fund has lost 2.65 per cent over the past year to 30 July and 5 per cent over the past three years to the same date.

An Aberdeen Standard Investments spokesman said: "While there was net outflows during 2017, Gars remains a highly compelling proposition for which there remains significant client demand.

"Gars has proved to be a consistent way of meeting investors’ needs for good returns with low levels of risk and the fund has performed well for investors since its introduction in 2006.

"Recent negative returns (in 2018) are due to some of our long-term investment views differing from the factors that drove markets in the period, in particular Italian politics and US dollar strength leading to widespread falls in emerging market assets.

"These relatively short-range influences, while uncomfortable, are not unusual. Periods like this have occurred before in the history of Gars and by continuing to apply our process and philosophy, while adapting to changing underlying drivers, we are confident the fund will resume an upward path as it has done previously."

The spokesman added that positions within Gars are selected because they are expected to perform over a three-year time horizon.

Ben Yearsley, a director at Shore Capital, said the "The concept of Gars is fine, bringing together 30 or so uncorrelated ideas that each have the ability to deliver positive returns for investors, however you are still dependent on the managers getting those ideas right and standard life hasn’t done a particularly good job of that over the last few years.

"I’m not convinced about the ability of absolute return funds to deliver their targeted performance. Many are opaque in structure and simply don’t provide investors with much if any of a return. Managers wheel out excuses as to why they haven’t performed in this sector, but those excuses are getting bit lame now. I’m struggling to see the purpose of the sector anymore."