Worries over outflow from Standard Life’s flagship multi-asset strategy

Worries about outflows from Standard Life’s flagship multi-asset strategy hit its shares, ahead of an £11bn (€12.2bn) merger with Aberdeen Asset Management to form the UK’s largest active manager.

Worries over outflow from Standard Life’s flagship multi-asset strategy

The merger will create a combined group, Standard Life Aberdeen, with assets of around £670bn and which aims to save at least £200m in annual costs.

The companies are looking to shore up their defences in the face of competition from lower-cost index funds and the increased cost of tougher regulations — pressures that are expected to prompt more industry consolidation.

“The rationale for the merger is strategic,” chief executive Keith Skeoch told a media call, adding that following the completion of the merger on August 14, “we can hit the ground running”.

The new group will be classed as an asset manager, rather than an insurer, and its headquarters will be in Edinburgh. The merger follows other large deals among active managers to fend off the growing threat from passive investment, such as the Janus Henderson tie-up which completed earlier this year.

Standard Life’s first-half operating profit before tax was £362m, up 6% and above a company-supplied consensus forecast of £353m, helped by a 1% rise in assets under administration to £362bn, in line with forecasts.

Standard Life’s £44bn Gars (Global Absolute Return Strategies) multi-asset investment strategy saw £5.6bn in net outflows, also in line with forecasts.

“The evidence I have seen to date says that Gars flows are starting to stabilise as performance has improved,” said Mr Skeoch.

Standard Life shares dropped 1.4% at one stage, retreating from recent two-year highs and among the biggest decliners in the FTSE 100 index.

Nonetheless, the shares are 16% higher than at the start of the year and are 48% up from a year earlier. Analyst Eamonn Flanagan at Shore Capital said Gars outflows were likely to worry the market and reiterated his “hold” rating on the stock.

Mr Skeoch and Aberdeen chief executive Martin Gilbert will be co-chief executives of the combined group, a structure which has also been met with some scepticism.

“The machinations of the joint CEO roles will be scrutinised closely in the months to come — we still doubt the wisdom of this move,” said Mr Flanagan. Standard Life said it would pay an interim dividend of 7 pence per share, up 8.2% and against a forecast 6.99 pence.

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