Management of Scottish Widows customers’ assets following the merger of Aberdeen and Standard Life
Scottish Widows and Lloyds Banking Group’s Wealth businesses have decided to review their asset management arrangements and have therefore given notice to Standard Life Aberdeen plc (“Standard Life Aberdeen”) to terminate their partnership agreements with Aberdeen Asset Management plc (“Aberdeen”).
Scottish Widows and Wealth entered into the partnership with Aberdeen following the sale of Scottish Widows Investment Partnership in 2014. This included long-term contracts for the management by Aberdeen of over £100bn of assets on behalf of Scottish Widows and Wealth.
These contracts enabled Scottish Widows and Wealth to terminate the contracts in the event that Aberdeen was subject to a change of control with a material competitor. Aberdeen recently completed a merger with Standard Life plc, which is a material competitor of Scottish Widows and also of Wealth. At the time, Scottish Widows and Wealth agreed to delay a decision regarding the exercise of their termination rights for a period of six months following completion of the merger, during which period the parties agreed to discuss in good faith ways to build a successful relationship and address the competition issue.
As no agreement has been reached, Scottish Widows and Wealth have decided to terminate their partnership agreements with Standard Life Aberdeen and to review their long-term asset management arrangements. Scottish Widows offers a broad fund range. This includes funds where we control the mandate, as well as offering access to external funds offered by third parties.
The majority of assets, including our pension default portfolios, are held in multi-asset portfolios mandated by Scottish Widows. Here we have full responsibility for the portfolios including their strategic asset allocation and selection of component funds for each of the asset classes.
In most cases, we outsource stock selection within these component funds to Aberdeen. We ensure that both the portfolios and component funds are being managed in line with their mandates and in each case, monitor their investment performance.
Control of the mandates and the underlying funds will remain with us. This ensures that we continue to invest in line with our commitment to customers. Similarly, there is no change in the ownership of assets, which also remain with Scottish Widows and Wealth.
There are no immediate changes for customers. Following completion of the review, Scottish Widows and Wealth anticipate implementing the new arrangements by the end of H1 2019. Scottish Widows and Wealth will work with Standard Life Aberdeen to ensure no disruption to performance or service in the interim.
Why are you changing your asset management partner?
Given the merger of Standard Life and Aberdeen has resulted in our assets being managed by a material competitor, it is now appropriate to review our long-term asset management arrangements to ensure they remain up-to-date and that customers continue to receive good service and investment performance.
Are you unhappy with Aberdeen’s performance or service?
No. Aberdeen has delivered good service and performance.
Do you think performance and service will decline as a result of this?
We have robust governance in place to ensure our customers benefit from strong asset management performance and service. With regards to our future long-term strategic partnership, we believe that other asset managers will also be able to deliver strong performance and service without the potential for actual or perceived conflicts of interest.
How quickly will you make these changes?
Aberdeen will continue to manage the assets while we undergo the review under the governance and direction of Scottish Widows. Following completion of the review, Scottish Widows and Wealth anticipate implementing the new arrangements by the end of H1 2019. Scottish Widows and Wealth will work with Standard Life Aberdeen to ensure no disruption to performance or service in the interim.