The merger between Aberdeen Asset Management and Standard Life suffered a setback after its largest client pulled assets.
Shares in Standard Life Aberdeen fell 6% on Thursday (15th) with news that Scottish Widows assets would be transferred elsewhere.
The joint chief executives of the merged company said they were disappointed, and an industry analyst said the move undermined some of the rational for the merger.
Lloyds Banking Group (LBG) handed 12 months notice to Standard Life Aberdeen on £109 billion (€122.5 billion) of assets managed for Scottish Widows, which is LBG’s banking subsidiary.
The funds are approximately 17% of Standard Life Aberdeen’s assets under management and 5% of revenues.
Keith Skeoch and Martin Gilbert, Standard Life Aberdeen’s joint chief executives, said: “We are disappointed by this decision in the context of the strong performance and good service we have delivered for LBG, Scottish Widows and their customers. We will be discussing the implications of this with LBG and Scottish Widows.”
Aberdeen took over Scottish Widows asset management business, Scottish Widows Investment Partnership, in 2014 but since the merger between Standard Life and Aberdeen, Lloyds has been in talks with Standard Life Aberdeen around the investment management partnership between the two groups.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said the decision was “a blow” for Standard Life Aberdeen but had been likely ever since the merger.
He added: “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.”
However while almost a fifth of Standard Life Aberdeen’s assets look like they might be “walking out the door”, this only equates to 5% of revenues, Khalaf said, adding that the investment services were relatively low margin.
He added: “It’s also worth noting the sort of funds involved are not run by the star managers of the stable, rather they are the sort of strategies that feature in older pension contracts sold under the Scottish Widows banner.”
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