Merging company

ALEX BRUMMER: Low road for the merger of Abrdn funds

ALEX BRUMMER: Abrdn’s move could undermine confidence in future of stunning new brand

When stalwart Edinburgh insurer Standard Life merged with fund manager Aberdeen in 2017, the deal was hailed as ushering in a new era of asset management in Britain.

Yet despite a raging bull market and the optimism of filibuster Martin Gilbert of Aberdeen and cerebral Keith Skeoch of Standard Life, it has been falling steadily since.

The two left the scene, the company was fashionably renamed Abrdn, the Standard Life insurance brand was sold to zombie insurance specialist Phoenix and Lloyds Bank’s funds management mandate was lost.

Abrn plunged into a pre-tax loss in the first half of this year

Chief executive Stephen Bird steered the group in a new direction by buying retail platform Interactive Investor for £1.49billion this year in hopes of breathing life into the group.

Growth has been slowed. Only 19,000 new investors were added to the platform in the first half of this year compared to 49,000 in the same period of 2021.

Abrdn plunged into a pretax loss in the first half of this year. There was an outflow of £36bn as Lloyds withdrew a final tranche of £25bn of pension fund assets. And to add to the humiliation, Abrdn is about to be kicked out of the FTSE 100.

The latest response to this debacle is to simplify things by closing or merging 100 “scaleless” or “duplicate” funds in a cost-saving measure affecting up to 40% of its portfolio.

This sounds reasonable but will be disruptive to investment professionals and ordinary savers.

My own experience with merged, deleted or divested funds suggests that this can destroy the bond between managers and client.

Such cruelty can only hasten a punitive decline for retail investors and undermine confidence in the future of the stunning new brand.

retail therapy

Anyone who listened to Andrew Bailey’s press conference last week might have wanted to go out and have a drink – interest rates up half a percentage point, inflation peaking at 13.3% and five quarters of recession.

Yes, the energy price shock is immense, but by the spring of next year, all things being equal, the UK should be over the worst. People at the bottom of the income scale are facing a crisis.

Big energies could provide some self-help by temporarily diverting some of their dividend income to hardship funds. The government already provides some £15billion in aid to the poorest.

No doubt the new Conservative Prime Minister will unveil a new support package soon after taking office in September.

Common sense can often seem absent from the Bank’s thinking.

Even as Bailey spoke, UK airports were operating near current capacity and Ryanair was maintaining a full summer schedule. BA’s focus on the North Atlantic may have caused bottlenecks elsewhere, but it is again generating profits.

Then there’s real-world data from the British Retail Consortium. Unexpectedly, the industry body said the value of total sales was 2.3% higher in July than a year ago, when the economy was still enjoying a post-pandemic rebound.

The rise in sales was boosted by summer items – clothing, food for picnics and air conditioning. Eating out has taken a hit, but that could be because many more affluent people are abroad. The increase in spending in July contrasts with the decline of the previous three months.

BRC chief executive Helen Dickinson insisted that despite the numbers, “consumer confidence is low”. Oh good?

Barclaycard reports that consumer spending rose 7.7% in July from a year earlier, boosted by spending on beauty products, clothing and vacations.

Despite the energy crisis and rising interest rates, consumers surveyed by Barclaycard feel better about their domestic finances, with 66% confidence compared to 59% in June. Imagine that.

Black glasses

Fans of the dynastic series Succession on Sky and its mountain equivalent Yellowstone on Paramount+ will have no trouble seeing parallels to Italian sunglasses champion EssilorLuxottica where founder Leonardo Del Vecchio recently died leaving behind a fortune of £22 billion.

Del Vecchio sought to circumvent the succession problem by putting the company in the hands of professional management. That won’t stop his six children and his last wife Nicoletta, all with stakes in holding company Delfin, from fighting for the ultimate spoils. To agree.