There must have been a good deal of travelling on the high and low roads of Scotland over the last few weeks, ahead of today’s announcement of the merger of Standard Life and Aberdeen Asset Management.
Ostensibly, the merger makes sense:
- Aberdeen is known for its global equity funds, and particularly its penchant for emerging markets. Performance has floundered badly in recent years and Aberdeen needed a fillip.
- And we all know how the Global Absolute Returns Strategies fund (GARS) has been struggling of late. Still Standard Life’s flagship, GARS has come under increasing scrutiny if not pressure. Whilst it might be said that diversified growth funds as a whole have lagged a rising market, GARS’ hedge fund approach has delivered particularly insipid returns.
- The thought of synergy and economies of scale is attractive, especially when there is a complementary fit of the component parts. “One and one is three” can be a compelling proposition. Yet it is well known that considerably more than half of mergers fail!
Our View: On paper, the behemoth that is to emerge should be well equipped to compete in an increasingly sophisticated and competitive market; so long as the business leaders lead the business and the investment managers manage the investments!