Scottish Widows has chosen Blackrock to run £30bn of assets in its index strategies as part of a £109bn investment contract set to be withdrawn from Standard Life Aberdeen (SLA), leaving Schroders as front-runner for the remaining mandate.
In February, Lloyds Banking Group announced it would take out the assets managed by SLA for its insurance arm Scottish Widows on the grounds of competition, providing a 12-month notice period.
However, SLA challenged the decision, saying Lloyds did not have the right to pull the assets, and is now undergoing an arbitration process.
In an update on Friday, Lloyds said it remains confident in its right to terminate the current agreements and expects the arbitration process to conclude early next year.
Blackrock will begin management of the assets upon conclusion of the process or when the existing contract with SLA expires.
Strategic partnership
In addition to the £30bn mandate, the group is pursuing a strategic partnership with Blackrock including collaboration in alternative asset classes, risk management and technology.
Antonio Lorenzo, chief executive of Scottish Widows, said: “Blackrock has been selected following a competitive tender process in which it clearly demonstrated its global market leading capabilities and deep expertise in the UK market.
“The partnership will ensure that Scottish Widows and the group can deliver good investment outcomes for its customers over the coming years.”
Adrian Lowcock, head of personal investing at Willis Owen, said: “Awarding the index portion to Blackrock makes a lot of sense, they are market leaders in fund management and have a lot of resources at their disposals to run a £30bn mandate comfortably.”
But Darius McDermott, managing director at Chelsea Financial Services, explained that while it is “a coup” for the asset manager to get a decent slice of the assets, he is confident it will be low margin business.
Who will manage the remaining assets?
Earlier this week, Schroders confirmed it is in discussions with Lloyds regarding its wealth arm, following speculation the retail bank may take a stake in Cazenove Capital.
Lloyds Banking Group said it is near to finalising arrangements for the remaining £80bn of assets that are within the scope of the asset management review.
Lowcock said: “Given that Lloyds have announced the tie up with Blackrock, the process is clearly coming to the end so an announcement feels imminent.
“From Schroders’ perspective it would be nice to announce the deal along with their results [on Monday], but it is far more important to do the deal correctly.”
McDermott said there is “a reasonable chance” Schroders will announce they have won some or the rest of the mandate.
Lloyds customers for the win
Additionally, McDermott said that the tie up between Schroders and Lloyds on wealth management could be “a good deal for both”. “It would surely see Lloyds’ clients getting a better offering,” he added.
Likewise, Lowcock said: “This makes some strategic sense, Lloyds has plenty of opportunities for it businesses and customers and Cazenove is a strong brand which could provide many solutions suitable for them.”
