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Co-CEO Gilbert steps down, as Standard Life Aberdeen's outflows surge


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Co-CEO Gilbert steps down, as Standard Life Aberdeen's outflows surge

U.K. asset manager Standard Life Aberdeen PLC announced the end of its controversial co-CEO leadership and the coming departure of its CFO, amid news of a 24% increase in net outflows during 2018.

Martin Gilbert, who had flagged his retirement in recent months, initiated the change by saying the co-CEO structure was increasingly becoming a distraction, both internally and externally, the company's chairman, Sir Douglas Flint, told a March 13 conference call.

By stepping down, Gilbert left Keith Skeoch as sole CEO from the time of the announcement, though he remained the group's vice-chairman and chairman of the Aberdeen Standard Investments unit.

In other changes, CFO William Rattray will leave his role at the end of May, and is to be replaced by Stephanie Bruce, PwC's current head of U.K. financial services, if she is approved by shareholders and regulators.

Spike in outflows

Net outflows rose to £40.9 billion in 2018, from £32.9 billion in 2017, and slightly higher than analysts' £40.3 billion consensus forecast. Assets under management fell 10% to £505.1 billion on Dec. 31, 2018, from £562.1 billion at the beginning of last year, while adjusted profit before taxes fell by £10 million to £650 million from the previous year.

The challenging market backdrop, especially in 2017's fourth quarter, to an extent "vindicated what Keith [Skeoch] and I discussed way back in January 2017 as to why we should merge the businesses," Gilbert said. Outflows came mainly from the higher margin equities and alternative funds; "big outflows have been in our big four blockbuster products, and the rest of the business is going okay," he argued.

After a 2018 investment performance that "can best be described as mixed," Standard Life Aberdeen's emerging market equities and multi-asset funds performed better in the first quarter of 2019, said Skeoch, though he cautioned that "it's going to take some time for this to filter through to slowing redemptions, let alone improving net flows."

With sovereign wealth funds' interest shifting from public to private markets, such as investing in real estate and infrastructure, Standard Life Aberdeen's scale should give it advantages in market research and risk modeling in private markets, Gilbert said.

"Those in middle ground are going to find it tougher and tougher, but it's a great place for boutiques. If you'd start again you'd start a boutique, be in the West End, go for lunch, do your shopping," said Gilbert, to laughter.

'Fully fledged' asset manager

The £2.9 billion sale of Standard Life Assurance to Phoenix Group, which was completed at the end of August 2018, "completes [Standard Life Aberdeen's] transformation from life insurer to fully fledged asset manager," and a resulting 19.98% Standard Life Aberdeen stake in Phoenix should keep those assets under its management, Hargreaves Lansdown analyst Nicholas Hyett said in a note.

Despite outflows, the retail platforms attracted £5.3 billion in net inflows.

The integration of Standard Life and Aberdeen was now 75% complete after their £11 billion merger which completed in August 2017, said Flint.

The arrival of the former HSBC chairman, who took over as the company's chairman in January, was broadly viewed as an attempt to calm investors who were skittish about persistent outflows and the dual CEO arrangement that formed part of the merger of equals.

Japanese bank Mitsubishi UFJ Trust & Banking Corp. sold its 6% stake in the company for £349.3 million on Feb. 15, after the U.K.'s Lloyds Banking Group PLC (with which the asset manager is currently locked in arbitration) sold a 3.3% stake for £344 million in June 2018.

Standard Life Aberdeen's share price rose to £2.52 by 3 p.m. London time after the announcement, up from a close of £2.45 the previous day.