Two years on since an all-share merger of Aberdeen Asset Management PLC and Standard Life PLC, the combined company's money management arm is seeing assets slip and a change in duties for a top executive, despite declarations at the time of the complementary nature of the firms' business lines.
The deal, announced March 6, 2017, was touted by executives as a way to create "scale across asset classes and geographies," aimed at boosting Standard Life's money management offerings in the U.K. and in emerging markets, where Aberdeen Asset Management had an edge.
But as of Dec. 31, Aberdeen Standard Investments has seen its assets under management drop to £505.1 billion ($641 billion), down from £583 billion in June 2017.
Its net institutional outflows totaled £27.7 billion in 2018 — another decline from net outflows of £19.7 billion the previous year, according to the firm's annual report. Some £16.5 billion in outflows from Aberdeen Standard's abso- lute-return strategies — primarily its Global Absolute Return Strategies Fund — accounted for more than a third of the firm's overall outflows of £40.9 billion in 2018.
Still another potential blow to the investment manager's AUM remains: Lloyd's Banking Group and its subsidiary Scottish Widows said they plan to start the transfer of a £100 billion mandate with Aberdeen Standard to new partners BlackRock Inc. and Schroders PLC. The current contract with Aberdeen Standard runs through March 2022. Lloyds and Scottish Widows had sought to terminate the deal earlier, saying they considered Aberdeen Standard a material competitor, but were overruled in March by an arbitral tribunal.
In an April 17 interview with Pensions & Investments, Aberdeen Standard Investments Chairman Martin Gilbert acknowledged challenges facing the firm, but said the Edinburgh-based active manager has identified a path for growth.
"I often say (money managers) have got three big headwinds: fee compression, public markets to private markets (transition) and then the active to passive (shift). It's a tough time for managers and (they) need to figure what to do about the headwinds," he said. "We are trying to build the private markets capability. We have got to show that active has a future," he added.
To position the company for growth, Mr. Gilbert stepped back from his role as co-CEO of parent company Standard Life Aberdeen in March to become chairman of the money management arm, a transition he said will enable him to focus on business development. The leadership change left the reins of Standard Life Aberdeen with Keith Skeoch, who had also been co-CEO.
In regard to the potential loss of the Lloyd's business, Mr. Gilbert was circumspect: "This is not a dispute with a client. This is a contractual dispute. We went to arbitration on this contractual dispute and the arbitrators have given their opinion. Who knows what's going to happen after that. We'll just have to wait and see."