Standard Life Aberdeen (SLA) has reached a settlement with Lloyds Banking Group over the termination of Lloyds (LBG) and its subsidiary, Scottish Widows’, assets with SLA.

Under the terms of the agreement, SLA will continue to manage approximately one third of the total AUM (circa £35bn as at 30 June 2019) on behalf of LBG entities until at least April 2022.

LBG originally gave notice of termination of its investment management arrangements that it had made with the former Aberdeen Asset Management in February 2018, following the merger of Standard Life and Aberdeen. These were originally due to run until 2022.

This was based on the contract, which the LBG and Aberdeen signed after the sale of Scottish Widows Investment Partnership in 2014, held a clause which allows the Lloyds’ businesses to terminate the contract “in the event that Aberdeen was subject to a change of control with a material competitor”.

However, in March 2019, an arbitral tribunal found that LBG was not entitled to terminate these investment management arrangements. SLA continued to manage approximately £104bn (as at 30 June 2019) of assets under management (AUM) for LBG entities during the period of the dispute.

AUM that SLA continues to manage comprises of around £30bn in passive portfolios, as well as circa £5bn in real estate funds.

Approximately two thirds of the total AUM will be transferred to third-party managers appointed by LBG through a series of planned tranches over the next nine months. During this period, the SLA will continue to be remunerated for its services in relation to the transferring AUM. In addition, SLA will receive an upfront payment of £140m from LBG as final settlement to compensate for loss of profit in relation to the transferring AUM.

SLA chief executive Keith Skeoch said: “We are pleased with the settlement with LBG and believe that it represents a fair and positive outcome for both parties. We look forward to building on our relationship with LBG and continuing to deliver positive outcomes for their customers. The retention of assets in our passive strategies as well as active real estate portfolios positions us to benefit from scale and growth in these growing parts of the asset management industry.”

Share Story: