By Kristy Dorsey
The chief executive of Standard Life Aberdeen has warned of turbulent times to come but insisted the fund manager will use the squalls of disruption across equity markets to identify fresh investment opportunities.
Speaking after the group posted a 10 per cent decline in full-year profits, Keith Skeoch said now was the time for “calm heads” amid the turmoil being created by coronavirus and plunging oil prices. For those able to invest and do their research, this dislocation will present opportunities.
“Yesterday was about pure panic,” he said, referring to Monday’s global stock market meltdown. “I have been involved in financial markets for 40 years, and I can count on one hand the amount of times we have seen the kind of panic we witnessed yesterday.”
Mr Skeoch said Standard Life Aberdeen would launch new funds and continue investing in its platforms after the UK’s biggest listed asset manager was hit by £58.4 billion of net outflows in 2019.
That figure included the £41bn lost in its fall-out with Lloyds Banking Group. Stripping out the massive Lloyds contract, Standard Life Aberdeen saw a £17.4bn outflow of investor cash last year, a 57% improvement on the £40.9bn lost in 2018.
The resulting 10% decline in adjusted pre-tax profits to £584 million was ahead of analysts’ expectations, while the fund manager also maintained its dividend at 21.6p per share.
Mr Skeoch said there was growing momentum across the business in the second half of last year, with improved investment performance and flows. However, it is currently impossible to predict the extent of the impact
of Covid-19.
“We know we are going to face a pothole in activity, but what we don’t know is how wide or deep that pothole might be,” he said.
Fee revenues at the Edinburgh-based group fell by 13% to £1.63bn following the two consecutive years of fund outflows. Assets under management and administration (AUMA) stood at £544.6bn at the end of 2019, down from £551.5bn a year earlier.
John Moore, senior investment manager at Brewin Dolphin, said the business remains “very much in transition” following its creation in August 2017 through the merger of Aberdeen Asset Management and Standard Life.
“The share price has been hammered since the turn of the year, along with the wider market, but the foundations of a strong company are there if you take a long-term view,” he said.
“Standard Life Aberdeen has been rigid with its cost-cutting, while new outflows have slowed to a degree and, reflecting the optimism attached to this, the dividend remains in line with guidance. Nevertheless, until there is asset growth and better market conditions, investors in Standard Life Aberdeen will have to remain patient.”
Lloyds announced in February 2018 that it was terminating a £100bn-plus contract under which Standard Life Aberdeen and predecessor Aberdeen Asset Management ran the money for Lloyds’ pensions arm, Scottish Widows. Scottish Widows chief executive Antonio Lorenza said at the time that the merger had resulted in the portfolio being managed by a
“material competitor”.
Standard Life Aberdeen disputed the claim, with a tribunal eventually finding that Lloyds had not been entitled to terminate the contract before the agreed date of April 2022.
As part of the settlement, the pair agreed that £35bn of assets will remain under the management of Standard Life Aberdeen until at least April 2022. Lloyds also agreed to make a payment of £140m in compensation for the loss of fees for managing the
remaining assets.
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