Standard Life and Lloyds Settle $129 Billion Fund Dispute

LONDON (Capital Markets in Africa) – Lloyds Banking Group Plc and Standard Life Aberdeen Plc have reached a settlement in what was one of the most high-profile disputes in the U.K. fund management industry’s history.

Lloyds, which wanted to pull a 104 billion-pound ($129 billion) mandate, will pay the asset manager 140 million pounds in cash as compensation, according to a statement from Standard Life on Wednesday. It will also leave about 35 billion pounds of the total until at least April 2022, some 30 billion pounds of which will be managed in passive portfolios and the remainder in real estate funds.

“It’s positive that Standard Life has some revenue compensation, but on the other hand it doesn’t solve the fundamental problem that the business is still shrinking,” said Charles Graham, a senior analyst for Bloomberg Intelligence. “Standard Life Aberdeen is still losing control over another block of assets which is not good news.”

In a sign of how important the assets are, Standard Life fought hard to keep the contract and challenged the legality of Lloyds’s decision to pull the money. An arbitration panel ruled in March in the asset manager’s favor, but Lloyds maintained at the time that it still planned to move the cash.

The arrangement between the two companies was a legacy of Aberdeen’s acquisition of Scottish Widows Investment Partnership from Lloyds in 2014. The lender, which said the Standard Life merger created a competitor to its own insurance unit that breached the contract, announced last year that it was ending the arrangement and looking for alternative managers. Lloyds named Schroders Plc and BlackRock Inc. as replacements.

The asset management industry has been battling fee compression and outflows for years as investors shift into cheaper, passive funds. Standard Life’s merger was intended to create a heavyweight capable of competing with low-fee passive money managers. But the merged company has suffered more than 70 billion pounds in outflows since the 2017 tie-up.

“We are pleased with the settlement with Lloyds Bank Group and believe that it represents a fair and positive outcome for both parties,” Standard Life Chief Executive Officer Keith Skeoch said in the statement. “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.”

The remaining funds will be withdrawn and allocated to other managers over the next nine months in stages and Standard Life will receive fees for assets until they’re transferred, according to the statement.

Source: Bloomberg Business News