Standard Life Aberdeen will manage £35bn of assets for Scottish Widows and receive £140m in compensation for loss of revenue, after the providers settled a dispute between them.
Scottish Widows, which is owned by Lloyds Banking Group, had removed £100bn of assets from Standard Life Aberdeen in February 2018.
The provider believed it had the right to remove the assets because of a clause in the fund management contract which allowed the agreement between it and Aberdeen to be terminated.
It believed the agreement could be terminated if Aberdeen Asset Management were ever to be owned by a competitor business to Scottish Widows.
Aberdeen Asset Management merged with Standard Life, which had an insurance business that Scottish Widows believed competed with its own operations, and thus Scottish Widows had the right to terminate the agreement.
But an arbitration hearing in March 2019 sided with Standard Life Aberdeen, contending that Scottish Widows had no right to terminate the fund management agreement, which is due to run until 2022.
Standard Life Aberdeen said the assets it was losing accounted for only a fraction of its profits, and were low margin, despite Scottish Widows being its largest client.
An announcement to the stock exchange this morning (July 24) confirmed that the matter has been settled, with Standard Life Aberdeen retaining the management of £35bn of the assets until at least the expiration of the original contract in 2022, and receiving £140m of compensation from Scottish Widows for the loss of revenue from the other two thirds of assets.
Standard Life Aberdeen will also be paid fund management fees for the other two thirds of assets until they are formally transferred away to new providers.
Scottish Widows has already announced the rest of the assets will be split between Blackrock and Schroders Wealth, an advice venture partly owned by fund house Schroders and Lloyds Banking Group, the parent company of Scottish Widows.
Around £30bn of the assets being retained by Standard Life Aberdeen are invested in passive funds, with the other £5bn in real estate funds, according to the statement put out by Standard Life Aberdeen this morning.
Keith Skeoch, the chief executive of Standard Life Aberdeen, said "We are pleased with the settlement with LBG and believe that it represents a fair and positive outcome for both parties.
"We look forward to building on our relationship with LBG and continuing to deliver positive outcomes for their customers.
"The retention of assets in our passive strategies as well as active real estate portfolios positions us to benefit from scale and growth in these growing parts of the asset management industry."
david.thorpe@ft.com
