The combination of Scottish Widows Investment Management Ltd.'s assets with Lloyds TSB Group's asset management wings will create a U.K.-based money manager with close to $128 billion under management and its sights set on expanding globally.
Last week, Lloyds TSB Group PLC, London, announced it agreed to pay L7 billion ($11.2 billion) for Scottish Widows Fund & Life Assurance Co., Edinburgh. Executives with Scottish Widows said they hoped the deal would be closed by March.
Scottish Widows Investment Management "is a U.K. asset management company that wants to be global," said Orie Dudley Jr., chief executive officer. The company is "nowhere near where we want to be on the Continent, in the United States or in Asia."
The new combined investment management company, which will go under the name Scottish Widows Investment Management and be based in Edinburgh, more than doubles the nearly $53 billion in assets Scottish Widows now manages.
It also extends considerably Scottish Widows Investment Management's reach.
The three Lloyds' subsidiaries -- Hill Samuel Asset Management and Abbey Life Insurance Services in London and Investment Advisers Inc. in Minneapolis -- will be run from Edinburgh by current Scottish Widows executives and led by Mr. Dudley, who will continue to report to Mike Ross, Scottish Widows chief executive. He predicted no immediate changes in staff.
The new Scottish Widows, which will come to life if the deal passes muster with regulators and policy-holders, would leap a few steps away from the top tier of global money managers.
Scottish Widows Investment Management ranked 137th among the world's largest money managers as of Dec. 31, 1997, when it managed $43.8 billion, according to the P&I/Watson Wyatt World 500 survey (Pensions & Investments, July 27). Based on that list, the infusion of assets would make it the world's 49th largest manager.
By March 31, Scottish Widows Investment Management had close to $53 billion in total assets under management, according to P&I's survey of the largest managers of U.S. institutional tax-exempt assets. (P&I, May 17).
More than 75% of Scottish Widows Investment Management's assets are from pension funds. Between $2.5 billion and $2.75 billion are from U.S. clients, said Allen McKenzie, marketing director.
Scottish Widows executives said the deal would not hinder the management of one of its leading funds, its European (ex-U.K.) portfolio.
In a letter to investors, Orie Dudley Jr., Scottish Widows Investment Management's chief executive, said the European equity team, which has $4 billion under management, would not change.
The European team of six professionals, led by investment director Albert Morillo, has recently known considerable success. It has so far gained $1.4 billion this year after winning $1.5 billion in 1998, said Mr. McKenzie.
Institutional investors with Scottish Widows were not upset with the news. "We have no short-term concerns," said Jim Teape, group pensions manager for the Granada Pension Scheme in London. The L1.7 billion scheme recently hired Scottish Widows to run L127 million in European (ex-U.K.) equities.
Scottish Widows executives said it was too early to tell how they could staunch the flow of assets from the beleaguered IAI in Minneapolis.
IAI has lost two-thirds of its managed assets in 24 months. It currently manages about $3.6 billion in separate account assets for tax-exempt institutional clients. At the end of 1996, it managed $11 billion (P&I, June 14).
The additions of Hill Samuel and Abbey Life complement Scottish Widows' strength in European equities, Mr. Dudley said. Hill Samuel, with $53 billion under management in pension and insurance assets, has had recent strong performance in U.K. and U.S. equities funds, he said; and Hill Samuel has been winning balanced accounts in the U.K.
Abbey Life, with most of its approximately $16 billion under management in mutual funds and insurance assets, is "reasonably strong in fixed income," he said.