Standard Life Aberdeen’s new moniker was met with mixed reviews this week but commentators aren’t put off by the vowel-less name so long as the underlying products don’t disappoint.
Following the sale of the Standard Life brand to Phoenix Group in February, Standard Life Aberdeen revealed its name change to ‘Abrdn’, a move which attracted widespread derision.
SLA said that the move “marks the next stage in the reshaping of the business and future-focused growth strategy” but what will the loss of the Standard Life heritage mean for the company?
SLA market value has halved since
The SLA brand itself was born in 2017 through the £13bn merger of Standard Life Investments and Aberdeen Asset Management but has struggled with outflows ever since.
Its funds business Aberdeen Standard Investments has seen assets more than halve since the businesses linked up, plunging from £65.4bn in Q3 2017, the quarter the merger was finalised, to £38.3bn at the end of Q1 2021, according to data from Morningstar. It racked up net redemptions for 13-consecutive quarters in a row, only breaking the streak in Q4 2020.
Over this time its market value has plummeted from £13.3bn in October 2017 to its current £5.9bn.
Darius McDermott, managing director of Chelsea Financial Services, reckons the main issue with the SLA union was size. As big companies with lots of funds and lots of products he said “it does take time to integrated different cultures, different investment platforms”.
“It has taken three or four years for it to look in a better place,” he says.
Ninety One holds up despite Covid and radical rebrand
Data from Morningstar prepared for Portfolio Adviser paints a similar picture for other asset managers that have changed their name or been absorbed by another brand in recent years.
Janus Henderson, which finalised its merger just before SLA in May 2017, started off reasonably well, attracting net inflows of £128.6m and £393.4m in the second and third quarter of that year. However this honeymoon period was short-lived, as it was hit by 12 consecutive quarters of net outflows.
Ninety One, which is the closest corollary to Abdrn in terms of adopting a radically different brand name, has fared somewhat better, despite spinning out from parent Investec in the middle of the coronavirus pandemic.
Though it saw close to £1bn in redemptions in the second and third quarter of 2020 it reversed the tide of outflows in the subsequent two quarters, attracting £340m. Its AUM is now higher than it was when it spun-off a year ago at £11.8bn, nearly back to its pre-pandemic high of £12.5bn in December 2019.
|AUM pre-merger/spin-off||AUM Q1 2021|
|Aberdeen Standard Investments||£65.4bn||£38.3bn|
AJ Bell head of active portfolios Ryan Hughes believes the “degrees of success with these changes is much more to do with the strength of the investment performance which is where the reputation of any asset manager lives and dies”.
“In the asset management world, what you are called and what the logo looks like really doesn’t matter, whereas the quality of the investment teams, the underpinning investment philosophy and the strength of the process and governance do,” Hughes says.
Aviva rebrand was mocked just like Abrdn
Hugh Elwes, managing director of Stephens, says “investors don’t really like lack of continuity or change, particularly the retail market”.
While people used to follow star managers with good long term track records, Elwes notes the trend has slowly shifted towards following “the style of the house, the delivery, the trustworthy brand”.
“Clearly when you get one [firm] taking over another, it can go well to a trustworthy brand. Equally, it can go badly if it goes somewhere investors don’t really like.”
Elwes describes brand recognition as “slow to build, very quick to destroy”. He notes that when Norwich Union and CGU decided to rebrand to ‘Aviva’ shortly after their merger, many were not at all complimentary, much like ‘Abrdn’ rebranding. But the firm managed to find success after “a lot of time and a lot of advertising”.
On the flip side brand reputation can “be destroyed very quickly, like the example of Woodford, by a scandal or something going wrong or just poor performance,” Elwes says.
Mergers are a double-edged sword of cost cuts and outflows
Peter Sleep, senior investment manager at 7IM, says outflows are inevitable when companies merge and brands are subsumed.
“I think when most of these deals went through they were seen as rather defensive and as opportunities to cut central costs more than anything else,” he says.
“M&A like theirs cuts costs but it often precipitates an outflow of money from the combining entities making a merger a double edged sword as can be seen from lacklustre and volatile share prices.”
Jupiter saw net outflows of £4bn in 2020, £2.2bn of which was leaked from Merian funds, despite it only acquiring the business in July. Chief executive Andrew Formica said the outflows had been expected due to manager chops and changes on the fund and in cases where performance had fallen short.
Though Jupiter is hurting now McDermott thinks the merger has added value, with Merian’s “strong UK desk” and well-regarded long/short funds and Gold & Silver fund, closing gaps in Jupiter’s existing offering.
“They are successfully integrating … all the key managers are still there a year on, all performing and hopefully raising some assets.”
Liontrust avoids rebranding pitfalls
McDermott says “the key to successful mergers is to maintain the best of breed across both businesses”.
Liontrust is a prime example of this, successfully taking Neptune, in July 2019, and Architas, in July 2020, under its wing, as well as integrating Alliance Trust Investment’s sustainable investments business.
Throughout this entire period of change and integration it has ended each quarter with net inflows, according to Morningstar, the only manager in the list to do so.
Elwes says: “Liontrust has been very successful in buying up a number of fund management companies and stripping out the costs of those, keeping the team in place and switching the brand names to their own and they’ve managed to do that pretty successfully”.
McDermott says Liontrust has also benefitted from Architas’ reputation in the IFA space and has been able to continue to sell through those distribution channels.
In its first quarter update, it recorded assets under management of £30.9bn, a 92% increase since 31 March 2020.