Stan Life Aberdeen assets top £577bn; outflows £16bn

Edinburgh-based investment giant Standard Life Aberdeen plc (SLA) said on Wednesday its assets under management and administration rose 5% to £577.5 billion in the first half of 2019.

Positive market moves added £41.2 billion to the firm’s assets total — against net outflows of £15.9 billion, which improved from £24 billion of net outflows in the second half of last year.

Standard Life Aberdeen’s fee-based income in the first half fell to £815 million from £966 million a year earlier. 

SLA warned that “demand for equities remains low across the wider market …”

SLA’s adjusted pretax first-half profit slipped to £280 million compared to £311 million a year earlier.

The firm’s shares fell almost 6% on Wednesday morning to around 264.6p to give it a current stock market value of around £6.7 billion, according to London Stock Exchange data.

The firm’s interim dividend was unchanged at 7.3 pence a share.

Assets managed by Aberdeen Standard Investments rose to £525.7 billion from £505.1 billion at the end of 2018.

Analysts at JPMorgan Cazenove, who have a valuation of 360p per share for Standard Life Aberdeen, wrote: “PBT of £280m was c3-4% below company compiled consensus £288m …

“The group’s capital position remains robust (£0.9bn surplus), and the 3-year investment performance has improved, which we believe may support future flows …

“We expect modest downward revisions to FY19 consensus estimates …

“The group’s investment performance has improved in H119 with 65% of AUM above benchmark over three years …

“SLA looks well positioned to benefit in the structurally growing UK pensions market, which we define as the retail platform market (i.e. SIPPs/mutual funds) and workplace pensions market.

“Over the past decade, SL’s UK pensions business has posted net inflows in every quarter, reflecting structural growth in the UK savings market, which we believe will continue to provide an attractive source of AUA and earnings growth …

“The combined AM offering is more diversified with minimal overlap in terms of product and clients with enhanced distribution.

“While SL GARS and the Aberdeen flagship equity funds have suffered net outflows, performance has improved and, with sentiment towards EM strategies recovering and multi-asset a structural growth theme, we believe this should support a slowdown in net outflows …”

Standard Life Aberdeen CEO Keith Skeoch said: “We have made good progress in reshaping our business so that it is set up to take advantage of the trends impacting our industry both globally and in the UK.

“We are encouraged by an improvement in our investment performance and a growing number of strategies with positive ratings from investment consultants.

“We are seeing inflows that are more diverse and are pleased to have retained £35bn of Lloyds Banking Group assets. 

“This, combined with lower redemptions and better markets, has helped us to increase assets by 5% to £577bn.

“Our focus on efficiency has delivered more cost savings, which combined with the benefits of share buybacks, has helped to increase earnings per share to 8.9p.

“We are also building for the future, with our business in China securing a license to develop a pensions business and our financial advisory business 1825 announcing two acquisitions that will significantly increase its assets, number of advisers and national reach.

“With a strong balance sheet, our drive for efficiency and ability to invest in innovation, technology and our people, we are well placed to deliver value and sustainable returns for our shareholders.”

SLA added: “Net outflows remained concentrated in a narrow range of strategies and reduced to £15.9bn (H1 2018: £16.9bn; H2 2018: £24.0bn).

“Encouragingly this was helped by an improvement in the investment performance of key strategies with reduced net outflows from Absolute Return compared to H2 2018.

“However, despite this improvement in investment performance, demand for equities remains low across the wider market and we continued to see elevated equity net outflows.

“Our industry leading platforms continued to attract net inflows however these were lower given weaker investor sentiment caused by ongoing political uncertainty in the UK and a reduction in defined benefit to defined contribution pension transfer activity.

“Gross inflows remain well diversified across our broad range of ‘new active’ capabilities and we have seen improved traction in Institutional and Wholesale with gross inflows of £22.8bn, up 7% on H1 2018 and up 40% on H2 2018.

“Momentum improved across a broad range of propositions and we continue to see strong interest in Credit, EM Fixed Income, Chinese Equities, Private Equity, Real Estate, Alternatives and Multi-asset solutions including the MyFolio range which is now over £15bn.

“We continue to enhance our range of ‘new active’ investment capabilities and launched 16 new funds during the period.

“The build-out of our capabilities in key areas of future market demand was accelerated with the acquisition of a direct real estate business in Asia, Orion Partners, and a new infrastructure joint venture with Investcorp in the Gulf.

“We also entered into a new joint venture with Gresham House applying a private equity like approach to small and medium-sized listed companies.

“We have also forged a new strategic partnership with Skipton Building Society, providing portfolio solutions to their customers with the launch of a new MyFolio Index range of funds. 

“Looking ahead, we have a good pipeline of new business across a broad range of capabilities.

“We continue to broaden out our investment capabilities with new product launches as well as making further progress in building our UK savings ‘ecosystem’.

“This includes the further expansion of our UK advice business, 1825, where we have announced the acquisitions of the wealth advisory businesses of BDO Northern Ireland and Grant Thornton UK.

“These deals will result in a c40% increase in assets under advice to around £6bn.”