Scottish Widows terminates Aberdeen partnership due to Standard Life merger
- Author: Anthony Vega Feb 17, 2018,
Feb 17, 2018, 0:12
Lloyds Banking Group said Thursday it is terminating its contract with asset manager Standard Life Aberdeen, which manages a £109 billion ($153.5 billion) portfolio for two Lloyds subsidiaries, citing competition concerns.
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It now runs £176bn in insurance assets and £646bn in total across the group meaning the £109bn will amount to almost 17% of current assets under management.
"Therefore, we will begin an in-depth assessment of the market to identify a long-term strategic partner, or partners, to manage the current £109bn of assets".
Scottish Widows agreed to hold off on the move for six months after the completion of the merger.
A United Kingdom pension fund and its parent bank have terminated about $200 billion in respective mandates with a major global asset manager.
Hargreaves Lansdown investment analyst Laith Khalaf says Lloyds will now have 12 months to find a home for the money, but notes that it represents a low margin business and finding a company that is not a rival in the workplace pensions market could be challenging.
Standard Life Aberdeen PLC (LON:SLA) has earned an average recommendation of "Buy" from the eleven ratings firms that are now covering the company, MarketBeat Ratings reports. Standard Life Aberdeen presently has an average rating of "Buy" and a consensus target price of GBX 477.50 ($6.60).
"Management at the UK's largest asset manager have been quick to reassure that Lloyds' decision to withdraw around 17% of the company's £646bn AUM (previously a third of Aberdeen's assets) would not have a material impact, however some shareholders disagreed, seeing shares fall as much as 10% after the open". In its base case - in which SLA can shed costs over three years equal to half the revenue associated with Scottish Widows assets - it sees 19% upside. First, a trading statement in December confirmed that the merged fund management business had suffered a net outflow of funds in the first nine months of 2017. Finally, Berenberg Bank increased their price objective on Standard Life Aberdeen from GBX 440 ($6.08) to GBX 460 ($6.36) and gave the stock a hold rating in a report on Friday, January 12th.