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Aberdeen-Swip: how does investment performance compare?
on Nov 18, 2013 at 16:46
We place the performance of Aberdeen and Swip's fund management teams under the microscope across the asset classes.
Aberdeen Asset Management is seeking to become one of Europe’s largest asset managers with its buy of Lloyds-backed Scottish Widows Investment Partnership (Swip).
The deal could cost Aberdeen up to £650 million. It will comprise £550 million funded by the issue of 131.8 million new shares to Lloyds, equivalent to 9.9% of current market cap, in addition to a £100 million payment conditional on five-year performance.
The deal adds £136 billion to Aberdeen’s £201 billion, making the company a major player in the European asset management market.
Chief executive Martin Gilbert highlights the exclusive long-term distribution relationship with Lloyds Wealth through its investment solutions division, bringing over some £15 billion is assets, as a key motivation behind the deal. The takeover will also significantly bolster Aberdeen’s property capability, bring over £98 billion in insurance mandates, £8 billion worth of assets in ‘liquidity solutions’. Around £2.4 billion in assets will also come over through the acquisition of the Swip Property trust, managed by Gerry Ferguson.
Some 38% in quantitative equities will come over as part of the deal, although question marks remain over whether Aberdeen will keep the quantitative strategy or shift to active management
Gilbert said he was unable to confirm the extent of any job losses at this stage but accepted that ‘where there is duplication, there will be some job losses’. Nonetheless he stated that ‘this deal is not prefaced on cost cutting’ and noted that half of Aberdeen’s assets under management would be run out of Edinburgh.
Here we look at the deal in numbers, how the assets break down and the performance of the investment teams across the two groups.
Perhaps unsurprisingly the winner in the emerging markets category goes to Aberdeen Emerging Markets’ renowned team, with its 10.5% return over the past three years versus a 4.1% loss by the £165.2 million Swip Emerging Markets fund, run by Swip’s global equity team.
The emerging markets assets could pose some challenges for Aberdeen’s team, headed by Citywire A-rated Devan Kaloo, following the firm’s decision to soft-close its emerging markets fund last year after imposing a 2% initial charge on the £3.2 billion fund.
SWIP’s £1.6 billion High Yield fund has outperformed Aberdeen’s equivalent in the same category with a 23% rise versus a 18.9% rise by Aberdeen. Swip's presence in the high yield market will bolster Aberdeen's £15.6 million fund, run by Paul Reed.
Question marks remain over whether all of Swip’s seven-strong multi-manager team, which is headed by Mark Harries, will transfer over to Aberdeen’s team, which has Graham Duce and Aidan Kearney at its helm. Swip’s eight strong multi-manager fund range will come over as part of the deal, joining Aberdeen’s seven strong range. However, the jewel in the crown for the deal is the distribution arrangement which will see some £15 billion of Lloyds’s wealth assets come under the control of the firm’s multi-asset and multi-manager teams. ‘Investment Solutions’ currently makes up 4% of Swip’s total assets.
Gilbert has so far remained tight lipped on the future of the two teams, simply commenting: ‘We will combine the capabilities’.
Over the past three years the Swip Multi-Manager International Equity fund has outperformed the Aberdeen Multi-Manager Equity Managed fund. The Swip fund has posted a 32.4% return versus 24.1% by the Aberdeen fund. The Swip fund is benchmarked against FTSE World ex UK index, which rose 38.6% over the period, while the Aberdeen fund’s FTSE World benchmark rose 38%.
Aberdeen opted to make a play in the Strategic Bond market with the launch of a dedicated fund in March of this year, led by Oliver Boulind, Aberdeen's head of global credit and global high yield. Since launch the Aberdeen Strategic Bond fund has posted a 0.6% return while the £119.4 million Swip equivalent, run by Roger Webb and Luke Hickmore, is up 3.1%. Swip's total fixed income assets comprise 18% of its total assets under management.
The deal will see six UK equity funds transfer over to Aberdeen. Comparing performance of the two plain vanilla UK equity funds, Aberdeen’s UK Equity fund has outpaced the SWIP UK Opportunities fund with a 39.7% rise versus 15.3% by the Swip team.
Run by Jeremy Whitley the £40 million Aberdeen fund, the fund has staged somewhat of a turnaround in performance over the past two years. The £109 million Swip UK Opportunities fund was managed by James Clunie, who left in April to join Jupiter, and is now run by the Swip global equity team.