Ahead of Lloyds’ imminent decision over whether to take away the Scottish Widows Investment Partnership (Swip) mandate from Standard Life Aberdeen New Model Adviser® has found billions of pounds of outflows from these funds.
Lloyds Banking Group is expected very shortly to make a decision about whether it will continue to allow Standard Life Aberdeen to run a significant mandate on its behalf.
Aberdeen Asset Management took on the mandate to manage £136 billion of assets for Lloyds when it acquired Swip, in a deal completed in April 2014. The money is managed for Lloyds’ pensions and insurance arm Scottish Widows.
Following the Standard Life Aberdeen merger, completed last August, Lloyds announced it would delay its decision about what to do with the Swip funds, which are now being run by its rival, for six months.
Due to the Standard Life-Aberdeen merger Lloyds ‘has the right to exercise termination rights’ and ‘make certain material unscheduled withdrawals of assets', the deal’s prospectus said.
The six-month delay ends on Wednesday and an announcement from Lloyds is expected imminently, possibly in its next set of results on 21 February.
This announcement could be a way of advertising the mandate to other fund managers in a ‘beauty parade’ or forcing a cut to charges, according to a Times report.
However even if Lloyds sticks with Aberdeen the mandate has dramatically diminished in size.
When the deal between Aberdeen and Lloyds was announced in 2013, the total value of the Swip assets was quoted as £136 billion as at August 2013. However, The Times reported the Swip assets are now valued at £100 billion, a £36 billion reduction.
To find more evidence of whether the funds had suffered outflows New Model Adviser® looked at the 55 Scottish Widows-branded funds, within Swip, that are listed on Lipper.
It showed £16.3 billion of outflows from April 2014 to December 2017.
Looking next at all funds listed on Lipper, the data for 2017 show that of the 10 funds that saw the biggest outflows, Swip funds accounted for four of them.
For example, the Scottish Widows International Equity Tracker which saw £1.3 billion of outflows last year, (second only to Standard Life's Gars fund). (See table below).
|Biggest outflows of 2017||Outflows (m)|
|Scottish Widows International Bond A Acc||-669.96|
|M&G Recovery A Inc||-740.4|
|Scottish Widows UK Index Linked Tracker I Acc||-771.43|
|Invesco Perpetual Income Inc||-779.34|
|AXA Framlington UK Select Opportunities R Inc||-878.64|
|Scottish Widows UK All Share Tracker I Acc||-946.04|
|JOHCM UK Opportunities B Acc||-960.67|
|Invesco Perpetual High Income Inc||-1164.45|
|Scottish Widows International Equity Tracker I Acc||-1306.87|
|Standard Life Inv Glo Abs Ret Strategies Ret Acc||-5496.04|
*data from Lipper Fund Research
Many of these funds are trackers. It may be more surprising to see outflows from these funds as there is no active management that investors might blame for poor performance, for example.
However a proportion of the assets are also from closed-book pension products, such as annuities, where outflows are more likely.
Aberdeen has previously noted the Swip outflows; commenting in its results for the six months to March 2017: ‘The structural outflow from the closed insurance book acquired with Swip will continue for the foreseeable future.’ This comment was made prior to the merger with Standard Life.
When approached Lloyds and Standard Life-Aberdeen declined to comment.