Diversification for Aberdeen, Renewed Focus for SWIP Fundholders

SWIP fundholders should benefit from renewed focus on the management of their assets, while Aberdeen is bolstered be less relianace on Asia and emerging markets

Holly Cook 19 November, 2013 | 10:50AM
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Investors in Scottish Widows Investment Partnership (SWIP) funds this week learned their money will soon be managed instead by Aberdeen Asset Management (ADN), which is to buy SWIP for around £660 million subject to regulatory approval.

As always when change such as this takes place, the uncertainty can be worrying for investors, but Morningstar analysts believe this could be a sensible move not only for SWIP fund unitholders but also for those of Aberdeen.

Given the financial services sector's turmoil of the last few years, one could argue that putting the investors of SWIP funds first may not have been Lloyds Banking Group's (LLOY) main priority. With the firm's decision to not only sell off the SWIP business, but also SWIP's related private equity and infrastructure fund management business, and its Investment Solutions business, it is hoped that investors in SWIP funds will benefit from a renewed focus by what will be—as a result of the deal—Europe's largest listed investment group by assets under management.

"Aberdeen has a history of making acquisitions so investors in Scottish Widows' funds have some idea of what they can expect," commented Jackie Beard, Morningstar's director of closed-end fund research. "There will be some natural overlap of funds, which will likely lead to fund mergers, so there could be scope to pass on some economies of scale to investors," Beard added, highlighting the potential for Aberdeen to reduce fund fees as assets swell following fund mergers.

In a statement yesterday Aberdeen said the deal combines the two firms' strengths across fixed income, real estate, active and quantitative equities, investment solutions and alternatives. "The deal bolsters Aberdeen's capabilities in fixed income and property, in particular, and it helps to diversify away from the firm's reliance on Asia Pacific and Emerging Markets," Beard said.

Manager departures over the years have seen SWIP left with no 'star managers', which is a good match for Aberdeen, where "the investment philosophy is applied firm-wide and there is no star manager culture," according to Beard.

Aberdeen started from humble beginnings, launching a £50 million investment trust in its namesake Scottish town in 1983. The firm is now a truly global asset manager with investment offices in Europe, Asia and the US, and assets under management expected to near £136 billion following the SWIP deal. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Lloyds Banking Group PLC53.96 GBX-0.85Rating

About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

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