There is obviously a huge caveat to this as this is likely to be the conclusion of something like an IPSOS Brand survey or Management Today’s ‘Most Admired Companies’ report rather than a bona fide award as the most trusted and preferred brand in the UK…
High street view
However, any such claim is more easily justified when associated with the views of the man on the street and his opinion of the life company, its mortgage, life and general insurance businesses as seen through its series of advertising campaigns over the years featuring the Scottish widow.
Any similar claim from Scottish Widows’ investment business – SWIP and Scottish Widows Unit Trust Managers – to the same man or his adviser is far harder to entertain.
As we said in August last year, the view of the professional investor is somewhat different with leading fund buyers, analysts and brokers all questioning the value of SWIP funds on their buy lists.
And if the reports at the end of last week that their parent company, Lloyds Banking Group, has hired Deutsche Bank to advise on a potential sale are true, then the professional view may get even greater support.
With a renewed appetite in the market for M&A involving fund groups – as Lloyds itself has identified hence its desire to sell one third of its share in St James’s Place – putting the investment business up for sale might be a very good move for its owner. So what will any potential buyer get?
According to a SWIP spokesperson, the two investment divisions (SWIP and SW UTM) are different authorised corporate directors (ACD) and are owned by different parts of the group. Whether it is one or both ACDs that are up for sale is uncertain as: “We do not comment on market rumour or speculations.”
The funds within SW UTM are basically the Scottish Widows’ life, pension and related bancassurance product money.
A narrow, specialist offering
The SWIP fund range, on the other hand, is a more specialist, retail offering available to the external market via IFAs, discretionary managers, platforms and so on.
Combined, and added to the HBOS own-brand and Scottish Widows HIFML (HBOS Investment Fund Managers Limited) ranges, the total assets under management at the end of the first quarter stood at £146.7bn, of which around 20% (£29.4bn) is third-party assets. The total AUM generated £108m in pre-tax profit.
Given SWIP and SW UTM are ultimately owned by a high street bank and are subsidiaries of a life company, the vast majority of the assets and profits are likely to be generated from the internal, fairly profitable life and pensions business attracted from its tied distribution network. It will be interesting to see whether this is enough to interest a life company looking for assets or a fund group looking to take on the £29bn in existing third-party assets – or another bank [one of the newer ones, perhaps?] looking for a combination of the two.
The majority of Portfolio Adviser’s readers fall squarely into the professional investor category as third-party distributors, so their interest will be partly at a corporate level and partly at a fund level. One area where these two overlap is the negative affect that the rumour of a sale has on the long-term future of the funds and fund managers.
Along with SWIP’s multi-manager team led by Mark Harries, SWIP is better known for its property team (Gerry Ferguson runs a £2.2bn Property Trust), its fixed income capability (Roger Webb and Luke Hickmore on the credit side, in particular) and its UK tracker range, among the cheapest on offer.
Reasons to be cheerful
Until the beginning of last week, James Clunie and his UK Flexible Strategy Fund would have been on this list though he has recently handed in his notice and is set to join Jupiter in July. He is simply the latest in a long line of managers to leave the group, going back to the announcement in April last year – and perhaps further than that – that it was to restructure its equities business which led Hargreaves Lansdown’s head of funds research Mark Dampier to say in August: “Hardly anyone does any business with them and we have not had any of their funds on our Wealth 150 list for a while. Any time a manager looks half good there they get poached, SWIP has not been able to retain staff and I have kind of put it to one side,” Dampier added. “The question I would ask is who is buying these funds?”
As long as there is even a hint of SWIP being sold, there will be concerns over the business’s long-term commitment to the market and is only going to discourage future investors from giving “the UK’s most trusted and preferred brand” any more of its hard-earned cash.
The consensus view among the professional investors might well be that SWIP offers them a limited retail fund range in an increasingly competitive environment…but the company has £29.4bn reasons to still be smiling for a long time yet.
