It is well known that the chief executive of Lloyds, Antonio Horta-Osorio, is looking at ways he can add cash on to his banking group’s balance sheet – earlier this month he separated out Lloyds Bank from TSB ahead of an IPO of the latter that is expected in the middle of next year.
Stockpiling cash
He could also sell SWIP to add to his pile of cash more immediately and it will be interesting to see what return if any he gets on the £7.3bn he paid in 2000.
Does he actually need to sell the investment arm? Possibly not, as Lloyds is hardly in the same financial straits as it was in 2007/2008 when it was the UK’s biggest mortgage lender in the middle of a huge crisis of faith in credit markets.
But banks are slowly moving back to being banks and there are a number of asset management firms – Aberdeen, ironically, being one of them with a strapline of ‘Simply asset management’ – that are promoting their investment capabilities on the back of not being a bank.
Threadneedle, Macquarie and Royal Bank of Canada are among a number of companies that have, allegedly, had a look under the bonnet and walked away so, as it is unlikely that SWIP could make it as a standalone business, what does it offer to a potential buyer?
In its latest list of rubbish funds over the past three years, the Chelsea [Financial Services] RedZone includes £33bn of assets across 115 funds – nearly one-third (£10.8bn) are run by what it describes as ‘RedZone favourite’ SWIP.
What do you think? Do they deserve such a bad press? Use the comment box below to let us know…
As well as holding lots of cash, in total SWIP runs nearly £150bn of assets so there are some good ones in there too, with the SWIP retail investment reputation handled manfully by its fixed income governors Roger Webb and Luke Hickmore.
Other managers whose reputation stands up among fund buyers include Gerry Ferguson, manager of the SWIP Property Trust and, until his recent departure to Jupiter, James Clunie, as manager of the SWIP UK Flexible Strategy funds.
They are comfortably joined on that list by the well-respected multi-manager team led by Mark Harries though Aberdeen AM already has its own Graham Duce/Aidan Kearney-inspired multi-manager funds team.
Good mix of assets
What SWIP represents to a potential buyer is a lot of assets, mostly at the low margin end; what it represents to Aberdeen AM is precisely the managers named above as, while it does have property, fixed income and multi-asset/manager propositions of its own, Aberdeen AM is still known as an emerging market house so there is a good asset class mix here.
But greater diversification is clearly needed. Earlier this year, head of emerging markets Devan Kaloo added a 2% initial charge to nearly £25bn of GEM fund assets in an attempt to stem inflows following capacity constraints and liquidity issues, added to which the volatility of the EM flows has increased in the recent past.
All-in-all it is this reliance on emerging markets that Gilbert is reported to be looking to diversify away from so a move for some of what SWIP has to offer – on the surface at least – makes some sense.
He may even take on the whole of SWIP and negotiate a distribution deal through the Lloyds and TSB branches.
Gilbert has integrated most previous acquisitions very well – deals with Credit Suisse, RBS, Deutsche and Coutts being good examples – as he has merged the assets without necessarily taking on the huge costs that other deals have, Henderson and Gartmore/New Star, for example.
But he has also walked away from potential deals and given everyone approached so far is saying nothing more official than “We do not comment on rumour and speculation”, who knows? He may just as easily be considering the acquisition of a US fund management business…or is that mere rumour and speculation too?
