Darius McDermott, managing director at Chelsea Financial Services, agrees the problem with the asset management business was that both Standard Life Investments and Aberdeen were over-reliant on a small number of strategies, with Aberdeen dependent on the Asia equities operation and Standard Life on its Global Absolute Return Strategies fund.
Both of those product ranges had been innovative when launched, with Gilbert among the first UK finance industry executives to understand the potential for growth in Asian economies and markets in future, and to dispatch senior people from the business to set up operations there.
Standard Life’s Gars offering was one of the first absolute return funds available to the UK retail market.
McDermott says: “The Asia strategy at Aberdeen was so successful that at one stage they hard closed it, that is, they wouldn’t allow anyone to put any more money in. The problem is, not long after they did that, the funds started to underperform, and so the outflows came. And because it was hard closed, there were no inflows to come in.”
The Gars fund shrunk from a peak of just over £20bn in size in 2018 to £4.9bn at the end of November 2019. At the end of March 2021 it was £3bn in size.
One of the problems faced by Gars and its investors was that several members of the original team left to launch copycat products. Founder Euan Munro joined Aviva Investors and eventually became chief executive of that business.
Other former Gars managers went to Invesco to launch a similar strategy.
But Ben Yearsley, co-founder of Fairview Investing, says the issues were more to do with the fund getting too big to be effective.
He says: “There was a reliance on a few key cash cows: Asia, Gars, Harry Nimmo, and there were too many underperforming areas. A merger clearly wasn’t going to solve the inherent problems. You’ve also seen a number of departures post-merger too – fund managers and also lots of the executive management team.
"Overall the merger has been pretty abysmal for shareholders - in what has been a great bull market - and also not great for investors. Areas that were doing well were arguably milked and took too much money.
Yearsley says the best fund management groups should be "pure asset management plays", adding: "don’t mess around with platforms or solutions, just have a range of great funds.”
The platforms
However, Standard Life Aberdeen is not just about funds. Having agreed to sell Parmenion, it is still left with two platforms: the Wrap and Elevate businesses.
