When Keith Skeoch joined Edinburgh-based Standard Life Aberdeen before the turn of the millennium it managed a smallish £67bn for clients. Much has changed since then. The chief executive is leaving an investment house with just over £511bn in assets. His successor — Citi’s Stephen Bird — faces the dual challenge of growing the business while also pushing down stubbornly high costs.
On Friday, Mr Skeoch led his last full-year results presentation after five years in the top job. Half-year profits were a little better than analyst expectations and net outflows from funds slowed to £6bn, from well over double that in previous six months. Yet SLA is still behind Schroders as the UK’s largest standalone fund manager. And even if Mr Skeoch and his team have brought overheads down, the core cost-to-income ratio, excluding joint ventures and associates, looks high at 82 per cent. That figure needs to fall below 70.
So long as watchdogs approve his appointment, an outsider such as Mr Bird could make the difference — depending on his approach. He might aim to grow SLA or refocus its energy on what it once did best: active management. At SLA’s size it barely makes the top 30 of global asset managers, according to IPE data. While another “transformational” merger will not be popular, SLA does have firepower. It sits on excess capital of £1.7bn and more than that in equity stakes that it could feasibly sell, points out Numis.
Then again, size does not guarantee success. SLA’s much smaller crosstown rival, privately held Baillie Gifford, excels. And there are examples of large asset managers turning themselves round. Consider Germany’s DWS, spun out of Deutsche Bank in 2018 as a listed company. After a rocky start in the aftermath of its IPO, costs have declined and the share price performance this year far exceeds that of SLA and Schroders.
Some patience is required. Assuming that Mr Bird aims to rebuild SLA’s reputation from within, he is going to need some time.