By Scott Wright
THE boss of Standard Life Aberdeen (SLA) has hailed the resilience of the fund management giant’s investment performance throughout the coronavirus pandemic.
Keith Skeoch said the momentum built up by the Edinburgh-based asset manager on performance in the second half of 2019 has carried into the first four months of this year, despite the shockwaves sent through global markets by the Covid-19 outbreak.
He said the volatility seen on leading global markets such as the FTSE 100 “strengthens the case” for active fund management, and noted that investors had been “calm” amid the upheaval. But he warned it would take a long time before the full extent of the impact of the crisis becomes clear.
Mr Skeoch’s comments came as SLA reported net outflows of £24 billion from its funds in the fourth-month period. Stripping out £25bn of withdrawals by Lloyds Banking Group, linked to SLA’s exit from the £109bn Scottish Widows mandate, the group reported estimated net inflows of £1bn.
READ MORE: Standard Life Aberdeen to take advantage of market turbulence
SLA successfully challenged Lloyds’ decision to cancel the mandate before the agreed date of April 2022 after the matter had gone to a tribunal.
The pair agreed in July that £35bn of assets would remain under the management of SLA 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.
Assets under management and administration at SLA were estimated at around £490bn on April 30.
“It is encouraging all round,” Mr Skeoch said. “It is encouraging that investment performance remained resilient; it remained resilient during the first four months of the year, and during the crisis period.
“Operationally we were resilient, and the fact our clients have expressed a degree of confidence in us, not only keeping assets with us, but sending us new assets to manage, given the scale of what is going on, it does feel encouraging.”
Asked how investors have behaved during the crisis, Mr Skeoch said they have been “calm throughout”, revealing that SLA had not seen “any of the panic that we saw around Brexit”.
He noted that “money has continued to flow in on the retail books,” as well as through its wrap and SIPP (self-invested personal pension) platforms.
READ MORE: Scots fund managers need to justify lofty reputation of sector
Mr Skeoch added: “The institutional market is open. It takes a bit longer, but it is still effective. On the wholesale platform, volumes are slower, but actually it has been relatively calm.”
Mulling the outlook, Mr Skeoch said short-term sentiment was being driven by daily news on the progress of the virus. He expects there will be more market volatility to come.
Mr Skeoch said: “The thing I worry about is we have seen quite a strong bear market bounce, and we have still yet to see the full-scale depth and length of the recession, and the impact on corporate earnings.
“I think you are going to see some volatility in markets in the second half of the year. Longer term, I’d be more optimistic.”
On whether the turbulence makes the case for active, versus passive, investing, he said: “That kind of volatility does strengthen the case for active. It is time for active management, it is time for stock picking, but I would say the benefits of that will be visible in the next couple of years, not the next couple of months. This is a long-term game. The golden rule of investment is buy low.”
Asked whether he thinks the transition period for the UK’s exit from the European Union (EU) should be extended, in light of the economic pressure brought by the pandemic, Mr Skeoch replied that it was a matter for Government. He said SLA was already prepared to serve customers in the EU from its offices in Dublin and Luxembourg.
Mr Skeoch was speaking shortly after conducting SLA’s annual meeting in Edinburgh with just one other person, with investors prevented from attending because of social distancing measures. It was due to have been vice-chairman Martin Gilbert’s last appearance before shareholders before stepping down from the board.
Mr Skeoch said it was “sad” that Mr Gilbert had not been able to attend, adding: “To be honest, I really miss connecting with our retail investors.
“It is one of the great pleasures, I think, of an AGM, to go and connect with shareholders who very often are coming from all over Scotland and all over the UK. It is nice to go and have a cup of tea and listen to their thoughts.”
Mr Skeoch said his primary focus was on the safety and well-being of SLA staff amid the pandemic, and noted the business was looking to learn lessons from its presence in global financial centres such as Shanghai, Copenhagen, and Frankfurt, where people are back at or are returning to work.
SLA said its financial position heading into the crisis was strong, boosted by net cash proceeds of £237m from the sale of shares in HDFC Life, the Indian life insurance business.
It will press ahead with the payment of the final dividend for 2019, of 14.3p per share, after winning approval from shareholders yesterday. Mr Skeoch said SLA has put no staff on furlough, and there have been no cuts to executive pay or bonuses.
All resolutions tabled at the annual meeting were passed.
Shares SLA closed up 3.9%, or 8.4p, at 223.1p.
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