Standard Life delivers curate’s egg farewell to independence

Comment Martin Flanagan

The last results for Edinburgh fund manager and life assurer Standard Life as an independent company mirror the general feelings towards its imminent £11 billion marriage to Aberdeen Asset Management.

A generally positive reaction but with niggling uncertainties. Standard gave a valedictory wave with a 6 per cent rise in operating profits and an 8 per cent lift in the interim divi – not the worst of farewells. However, the group disappointed the market with news of net outflows of funds under management of £3.7bn.

The worst-hit was its flagship Global Absolute Return Strategies (Gars) fund, which had outflows of £5.6bn. It cast a shadow. In the same way, generally speaking most investors are prepared to give Standard chief executive Keith Skeoch and Aberdeen’s Martin Gilbert the benefit of the doubt on the merger of their firms.

But there remains scepticism, most notably about them sharing the top job in the enlarged entity. It is not just a sullen minority of the City who think this arrangement seems a little too clever by half and could end in tears because of a lack of absolute clarity at the helm.

The only way Skeoch and Gilbert will be able to refute these misgivings is to prove it works. No pressure, then.

As for Standard’s results, why the outflows? It is largely sector-wide, even if Aberdeen has been a chronic sufferer from such outflows in recent years (which some believe was a trigger for the merger, to weather a tough backdrop for active fund management via a defensive coupling to shake out £200m of costs).

Since the financial crisis has burnt many wallets, many investors have begun worshipping the new totem of capital retention. If this is the case, the data makes a strong case for passive fund management rather than risking falling off the shoulders of so-called star active fund managers.

Net outflows have to be seen in that sense. They are a blot on the fund management escutcheon, but when it is part of a wider phenomenon one should realise that even well run operators cannot be immune from a new zeitgeist.

The hope – fond or otherwise – is that Standard Life Aberdeen, as the heavyweight will be known, will come out the other end into a land of milk and honey – and inflows.