Standard Life Outflows Persist as Investors Flee Markets

(Bloomberg) -- Standard Life Aberdeen Plc is still hemorrhaging client cash.

Redemptions reached a net 16.6 billion pounds ($21.5 billion) in the first half in the latest sign that investors remain nervous about market volatility and economic uncertainty. It’s more bad news for a company that was created in a merger a year ago, only for Lloyds Banking Group Plc to announce plans six months later to pull the Scottish firm’s biggest mandate.

“Conditions for the asset management industry continue to be challenging,” Standard Life co-Chief Executive Officers Martin Gilbert and Keith Skeoch said in a statement Tuesday. “We are actively taking steps to improve our investment performance in key areas.”

The pain suffered by Standard Life is symptomatic of the woes of Europe’s asset-management industry, where client outflows are adding to long-felt issues ranging from squeezed margins and regulatory headaches to competition from cheaper passive funds.

Aberdeen Standard Investments, the asset management unit, had net outflows of 19.2 billion pounds in the first half. The market had expected 17.8 billion pounds, based on 16 analyst forecasts compiled by the money manager.

The shares were up 0.6 percent at 8:07 a.m. in London trading, slightly ahead of the FTSE 100 Index. The company said it would accelerate a share buyback program, with a first tranche of 175 million pounds to commence in the coming days.

The two companies that formed the asset manager had been losing client cash even before the August 2017 merger. The old Standard Life had 3.7 billion pounds of net outflows in the first half of last year as clients pulled money from its flagship fund, while Aberdeen Asset Management also headed into the marriage shedding investor cash.

“Net flows remain a challenge, but it is encouraging that these are concentrated in a narrow range of strategies,” the company said in the statement, adding that investors put money into its “new active” strategies.

While consolidation promised some benefits, the example of the Edinburgh-based firm shows that mergers can create as many problems as they solve. When Lloyds gave notice of its plan to withdraw 109 billion pounds, it said it was because the Aberdeen-Standard Life tie-up put the money manager into competition with the bank’s own insurance unit. Standard Life is challenging Lloyds’ decision.

The sale of Standard Life’s insurance unit to Phoenix Group Holdings, which is aimed at turning the Scottish firm into a capital-light investment company, is due to be completed in the third quarter. Standard Life has said it plans to cut costs and return money to shareholders as a result of the deal.

Click here for more on the implications of the Phoenix Group deal

Other highlights of the results:

  • Gross inflows of 38 billion pounds in first half compared with 39.5 billion pounds in the same period a year earlier
  • Assets under management fell to 610.1 billion pounds from 627 billion pounds a year earlier
  • The firm’s GARS fund had net outflows of 5.3 billion pounds
  • Fee-based revenue fell 7 percent, reflecting the impact of client outflows and what the firm called “adverse market movements.”

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