Banking

ALEX BRUMMER: Low road for fund merger Abrdn

ALEX BRUMMER: Abrdn’s move may sap confidence in the future of the new whizzy brand

When the doughty Edinburgh insurer Standard Life merged with fund manager Aberdeen in 2017, the deal was hailed as ushering in a new era of asset management in Britain.

Yet in spite of a raging bull market and the optimism of the buccaneering Martin Gilbert of Aberdeen and the cerebral Keith Skeoch of Standard Life, it has been downhill ever since.

Both have departed the scene, the firm was trendily renamed Abrdn, the Standard Life insurance brand sold to zombie insurance specialist Phoenix and the mandate to manage funds for Lloyds Bank was lost.

Abrdn plunged into a pre-tax loss in the first half of this year

Chief executive Stephen Bird took the group in a new direction by buying retail platform Interactive Investor for £1.49billion this year in the hope of breathing life into the group. 

Growth has been stunted. Just 19,000 new investors were added to the platform in the first half of this year against 49,000 in the same period of 2021.

Abrdn plunged into a pre-tax loss in the first half of this year. There was an outflow of £36billion as Lloyds removed a final tranche of £25billion of pension fund assets. And to pile on the humiliation, Abrdn is on the verge of being expelled from the FTSE 100. 

Latest response to this debacle is to simplify matters by closing or merging 100 ‘non-scale’ or ‘duplicated funds’ in a cost-saving measure affecting up to 40 per cent of its portfolio. 

That looks sensible but will be disruptive for both investment professionals and ordinary savers. 

My own experience with merged, axed or disposed of funds would suggest it can destroy the bond between managers and client. 

Such ruthlessness may only hasten a punishing decline for retail investors and sap confidence in the future of the new whizzy brand.

Retail therapy

Anyone tuning into the press conference by Andrew Bailey last week might have wanted to go out and get a stiff drink – interest rates up half-a-percentage point, inflation to peak at 13.3 per cent and five quarters of recession.

Yes, the energy price shock is immense but by the spring of next year, all things being equal, the UK should be past the worst. People at the bottom end of the income scale do face a crisis. 

Big energy could provide some self-help by temporarily diverting some of their dividend income to hardship funds. The Government is already providing some £15billion of help to the poorest.

There can be little doubt that the new Tory Prime Minister will be unsheathing a further support package soon after taking office in September.

Common sense can often seem to be missing from the Bank’s thinking.

Even as Bailey was speaking, Britain’s airports were operating at close to current capacity and Ryanair was maintaining a full summer schedule. BA’s focus on the North Atlantic may have led to bottlenecks elsewhere, but it is delivering earnings again.

Then there is real-world data from the British Retail Consortium. Against the odds, the industry body reported the value of total sales was 2.3 per cent higher in July than a year ago when the economy was still enjoying a post-pandemic bounce.

Higher sales were driven by summery items – clothing, food for picnics and air conditioning. Eating out took a hit but that could be down to many better-off people being overseas. The rise in spending in July contrasts with the fall in the previous three months.

BRC chief executive Helen Dickinson insisted that in spite of the numbers ‘consumer confidence is weak’. Really? 

Barclaycard reports that consumer spending was 7.7 per cent higher this July than a year earlier, boosted by spending on beauty products, clothing and staycations. 

In spite of the energy crisis and rising interest rates, consumers surveyed by Barclaycard were feeling better about their household finances, with 66 per cent reporting confidence against 59 per cent in June. Fancy that.

Dark glasses

Fans of the dynastic series Succession on Sky, and its Montana equivalent Yellowstone on Paramount+, will have no trouble seeing parallels at Italian sunglasses champion EssilorLuxottica where founder Leonardo Del Vecchio recently died leaving behind a £22bn fortune.

Del Vecchio sought to circumvent the succession issue by putting the company in the hands of professional management. That won’t stop his six children and last wife Nicoletta, all with stakes in holding company Delfin, fighting over the ultimate spoils. Tune in.

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