Standard Life Aberdeen (SLA) suffered a further decline in underlying pre-tax profits during the first half, despite an improvement in net outflows. Fee-based revenue declined 16 per cent as higher-margin equity and multi-asset strategies remained out of favour with investors.
While the rate of redemptions reduced, net outflows still came in at a hefty £15.9bn, a mere £1bn improvement on the same time last year. Those outflows were centred around four strategies – the flagship Global Absolute Return Strategy (GARS), emerging market, global and Asia Pacific equities. GARS alone suffered £6.1bn in net outflows. However, overall assets under management and administration were boosted 5 per cent thanks to improved investment returns.
Those four strategies accounted for 92 per cent of outflows and just 10 per cent of new business during the period, said chief executive Keith Skeoch.
“By and large, where we have had an issue it’s been about business as usual – it’s been about underperformance,” said Mr Skeoch. There was some improvement in investment performance, with 65 per cent of assets under management above benchmark over three years compared with just half last year.
However, due to GARS underperformance over the past three years, the asset manager gave some customers that invested in the strategy a "fee holiday". If GARS returns to beating its benchmark – aimed at beating cash returns by 5 per cent over a rolling three-year period – then those customers will be charged “full fat fees”, Mr Skeoch said.
The good news was that the half-year dividend was held at 7.3p and a £200m share buyback was announced, the final part of the £750m repurchase programme. Buying back shares helped flatter adjusted earnings per share, which rose 9 per cent year on year.
The Wrap and Elevate platforms also put in a stronger showing, gaining net inflows of £2.5bn, benefiting from what Mr Skeoch called the “democratisation of investment” as individuals take more responsibility for their wealth management. That also spurred the acquisition of the wealth advisory businesses of BDO Northern Ireland and Grant Thornton UK.
