Standard Life £11billion merger to pay off
The life and pensions giant suffered £3.7 billion of net outflows in the first six months, with investors pulling out £5.6 billion from its flagship Global Absolute Return Strategies fund.
Standard’s chief executive, Keith Skeoch, whose joint chief executive role with Aberdeen counterpart Martin Gilbert in the combined business has raised concerns, said: “People were circumspect about the benefits of the merger and I would not be surprised if that remained in place for another few months.
“Clients have taken a wait-and-see approach. People by and large get the strategic rationale behind the deal but want to see we are executing well.”
He insisted that becoming diversified would pay off in the medium term as active fund managers such as Standard try to counter the growing threat from cheaper, index-tracking passive funds.
The newly formed Standard Life Aberdeen will be the UK’s biggest active asset manager with £660 billion under administration and is targeting annual cost savings of £200million.
Skeoch said: “We have the opportunity to create a world-class investment company. The combined leadership teams are working well together so we can hit the ground running.
“We are excited by the opportunities ahead. Our business is well positioned for the global trends that are shaping the savings and investment landscape and our positioning will be further enhanced by the merger with Aberdeen.”
Despite the overall outflow of funds, Standard’s assets under administration grew by 1 per cent to £361.9 billion and operating profit before tax increased by 6 per cent to £362 billion.
Net inflows into its workplace and retail products were £4.2 billion.
Shares fell 1¼p to 442p. Neil Wilson, senior market analyst at ETX Capital, said: “Active fund management is not dead but more and more investors are swapping the hefty fees of the star managers in favour of passive investing.
“Standard’s struggle to stem flows reflects a problem facing the whole active sector. Whether the merger pays off, active fund management has to cope with a lot of change.
“It’s becoming a tougher sell to investors and fees are falling.”
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