Standard Life Aberdeen Share Discussion Threads

[chinese investor] 24/11/2020 09:27

25p to 300p for a 15% profit !

[gilston] 18/11/2020 17:23

Perhaps Bird could first do something about Gilbert`s legacy of 10 Aberdeen investment trusts all trading on double digit discounts to NAV [see FT listings].

[spud] 18/11/2020 11:19

Standard Life Aberdeen wants to compete with BlackRock in ETFs: ‘It will be quite a challenge’
BlackRock, Vanguard and State Street have a 20- to 30-year headstart in the ETF space, which in Europe alone has swelled to assets worth more than $1.1tn



Standard Life Aberdeen chief executive Stephen Bird has plans to launch SLA into the ETF market.
By David Ricketts
Wednesday November 18, 2020 12:01 am

Standard Life Aberdeen’s new chief executive has been in the top job for just over two months, but he already has grand plans about how he wants to transform the £511bn asset manager to compete with some of the world’s largest passive players.

Former Citigroup executive Stephen Bird, who took over at the helm from Keith Skeoch in September, said he wants to propel SLA into the booming exchange traded funds sector, which at the end of September had assets of more than $1.1tn in Europe alone.

SLA is known for its stock-picking capabilities. However, Bird has indicated the ideal active-passive split he wants to achieve is 70:30, according to an interview with Bloomberg on 12 November.

“We can either buy proprietary ETF technology, buy an ETF business or build it,” he said.

A spokesperson for SLA pointed to its acquisition of the US business of commodity ETF provider ETF Securities in 2018, where assets have doubled to $6bn.

“Work is underway to build upon this success, by delivering our research and analytical strengths via ETFs,” said the spokesperson.

However, analysts say making a concerted push into the ETF sector might be a tall order for the Edinburgh-headquartered asset manager, which has seen assets plummet from £660bn in 2017.

“It will be quite a challenge to achieve this,” said David McCann, an analyst with Numis Securities.

McCann said the biggest factor for success in the passive investment sector was possessing significant scale, due to the low fees index tracking products charge.

Dominant players in the ETF sector also have significant muscle. BlackRock, the world’s largest asset manager, oversees $490bn in ETF assets in Europe. The top three ETF providers in the region have control of more than 62% of the market.

“Bearing in mind that BlackRock, Vanguard and State Street have a 20-30 plus year headstart, and certain European competitors like L&G, DWS, HSBC and Amundi also are well experienced in this market, it is really hard to see how this might work,” said McCann.

McCann added that an acquisition is likely to be the only way Bird can achieve his goal of launching SLA into the ETF business.

“However, if the ratio is 70:30, and assuming the current business were to stay the same, this implies that the passive business they’d be looking to achieve would be [around £200bn] in size,” said McCann.

“That is still tiny compared to the passive businesses being run by BlackRock, Vanguard, State Street, L&G [and others].”

Tom Mills, an analyst with Jefferies, added the push into passives and ETFs with the ambition of building this capability to 30% of assets from scratch “is likely to come as a surprise to the market given competitive dynamics in that segment necessitate tremendous scale”.

Mills said Lyxor — one of Europe’s largest ETF providers with around $84bn of assets and which is reportedly up for sale — could be a potential buying opportunity for SLA.

Martin Gilbert, former vice-chair of SLA, told Financial News in August that Bird was likely to pursue deals to help build the asset manager.

“Stephen will be really good on the organic growth front and on some selective M&A,” Gilbert said in August.

“He has the strength of the balance sheet to build whatever he wants. I don’t think he’s taken the job to stand still.”

Peter Sleep, a portfolio manager at Seven Investment Management who invests in ETFs, said building up a passive business would not be impossible for SLA, given its previous experience managing around £30bn in passive assets for Scottish Widows, before this was pulled in 2019.

But significant scale would be needed in order to make profits, particularly in the ETF sector.

“It is really hard to compete against BlackRock, State Street and Vanguard: the market megaliths. Margins are wafer thin and competition is intense,” said Sleep.

“There are obviously lots of smaller players that they could buy, just for the experienced people to give a smoother start into ETFs,” he added.

Nick Hyett, an equity analyst at Hargreaves Lansdown, said in order to succeed SLA will have to offer something existing ETF players do not.

“Since passive funds should, at least in theory, be more or less identical in what they invest in, the only real differentiator is price,” said Hyett.

“Really you need scale to compete on price, so its difficult to see how a fledgling SLA ETF offer could compete on that basis.”

spud

[chinese investor] 17/11/2020 15:31

31p to 300p for a 15% profit !

[fenners66] 16/11/2020 15:55

Pierre Oreilly 16 Nov '20 - 08:16 - 2424 of 2426

"One thing's for certain, remove some buys, and the price would be lower. Therefore, removing sla's buyback buys would also leave the price lower than it would otherwise have been.

Buybacks don't mean the price rises. They mean the price is higher than if there weren't a buyback."


Agreed - on the given day.
It's supply and demand
So the price they are willing to buy at today adding demand may artificially raise the price - today.
It may not it depends upon supply.

However tomorrow , next week ?
The market gets like a junkie needing the demand fix - and when the company stops buying ?

Not only has it not worked out for holders - it actually seeks to "reward" those who are jumping ship.
IF they want to give the cash to shareholders make it an ongoing higher dividend that adds incentive to keep the shares - not to dump them.

[fenners66] 16/11/2020 13:35

"Pierre Oreilly
15 Nov '20 - 07:57 - 2420 of 2425

Fenners, increasing debt and ridding cash both increase enterprise value, not decrease it."


OMG - I would like to say I have seen it all now - but I'm sure I will be shocked further in the future!

There is learning a formula , and there is understanding it.

"Enterprise value (EV) = Equity value (QV) + Net debt (ND)"

Pierre if you look at the above as a set of scales.
On the one side you have Enterprise value - its based upon the value of a company's assets - the balance sheet if you like and
the expectations of future cash flows - from profits etc.

On the other side are two things to add together to give a value.
An approximation

A best guess.

Share capital and debt

They do not change the EV it changes itself and is reflected in QV+ND

Furthermore if you INCREASE ND you REDUCE QV to balance it again all other things being equal.


The point is that spending all the cash reduces the balance sheet and therefore reduces EV.
By adding debt you add interest and therefore reduce future cash flow - reducing EV

Worse though they would not be borrowing to buy an accretive asset they are just removing some of the other part of the scale - debt for a buyback would reduce EV and push the value into ND.

Worse it adds doubt to the market and reduces in many cases EV further.

[mcunliffe1] 16/11/2020 08:40

P.O., You stated that I said/implied:

"Your view that the price has fallen due to buybacks and no other factors..."

Can't remember saying that Pierre. My clarity has failed however if you thought that's what I said.

[pierre oreilly] 16/11/2020 08:16

Well the churlish but true reason is sentiment leading to more sells than buys depending on the timescale you choose ( it has risen over some timescales).The factors driving sentiment are many. I'd say the main one on a 12 month basis is the pandemic. Some factors are nothing to do with sla, but affect the market as a whole, so drive sla's price too. Ditto sector drivers.One thing's for certain, remove some buys, and the price would be lower. Therefore, removing sla's buyback buys would also leave the price lower than it would otherwise have been.Buybacks don't mean the price rises. They mean the price is higher than if there weren't a buyback.Your view that the price has fallen due to buybacks and no other factors is perverse imv.

[mcunliffe1] 15/11/2020 22:40

So P.O. why do YOU think the share price has fallen?
Do you think it would have fallen more/less with/without the share buyback?

[pierre oreilly] 15/11/2020 19:59

Mcun, you can't look at what the price has done and deduce from that what the ev has done. Sorry, you can, but you're incorrect in doing that.

[mcunliffe1] 15/11/2020 10:58

P.O. Net Debt is the key to adjusting Enterprise Value.

If a company borrows £1m (debt) and fails to use it - simply keeps it in the bank - this has NO affect upon EV.
If that same £1m is spent on a Davos social, sorry, Business, trip then EV is diminished.

Let's assume SLA did not borrow to fund the share buy-back. The cash that they held has however been used to buy the shares.

In the formula:

Enterprise value (EV) = Equity value (QV) + Net debt (ND)

I suspect Net debt (debt and equivalent minus cash) has fallen - by the amount spent on the buy-back. Therefore, EV will have fallen unless you believe the Equity Value (QV) has risen by an amount equal to the cash spent in which case EV remains unchanged.

However you view it the share price has indeed fallen throughout the buy-back so Fenners has a valid point.

Let's remember, the recent share rally was vacine injected (sorry) as other companies in the non-life sector have risen similarly.

[pierre oreilly] 15/11/2020 07:57

Fenners, increasing debt and ridding cash both increase enterprise value, not decrease it. So to rephrase what you said, ....increasing debt increases ev therefore increases share price, and I'll add 'all other things being equal'.

[chinese investor] 13/11/2020 15:30

41p to 300p for a 15% profit !

[mcunliffe1] 12/11/2020 15:30

Lots of jazzy words there from Mr Bird.

I love this one:

"Stephen Bird is on the hunt for acquisitions and new technology to lead the money manager into a strategy that’s become indispensable to the industry’s growth: passive management."

We've had passive management since the merger :-)

I love the prospect of SLA acquiring anybody having spent so much money acquiring its own shares.

And for God's sake buy EFT technology or business and don't think of developing it yourselves as it'll work as badly as your systems handling draw-down.

[spud] 12/11/2020 12:07

Standard Life Aberdeen’s CEO Looks to Deals in Passive Shift
By Suzy Waite
12 November 2020,



Standard Life Aberdeen Plc’s new Chief Executive Officer Stephen Bird is on the hunt for acquisitions and new technology to lead the money manager into a strategy that’s become indispensable to the industry’s growth: passive management.

In his first published interview since taking the helm in September, 53 year-old Bird said he plans to reverse an investor exodus by building a stable of passive products that could eventually account for as much as 30% of its assets. The 512 billion-pound ($677 billion) firm, which relies almost entirely on stock pickers and bond specialists to choose investments, needs to ease its reliance on active managers and embrace the global swing toward index investing if it’s to thrive and grow, Bird said.

Passive business “is an essential component of a full solution provider. We are screening for which technology, which people, which capabilities can help us get there,” said the ex-Citigroup Inc. banker. “An ideal active-passive split would be 70/30.”

Bird wants to turn Standard Life Aberdeen, which traces its roots back nearly 200 years, into a “21st century competitor.” He’s chasing a chunk of the business that index giants BlackRock Inc. and Vanguard have already been enjoying for years as investors fled higher-fee active managers in favor of cheaper funds that simply track markets. That’s seen the global universe of passive funds soar to $12 trillion of assets under management, according to Morningstar Inc.

“If you stay as an old traditional asset class asset manager, you will be extinct,” he said. “But if you say I’m going to go closer to my clients, I’m going to listen more intently to them, I’m going to connect to them more seriously, then you’re high value.”

Bird has his work cut out. He’s inherited a firm that’s suffered a constant string of investor outflows since it was formed by the merger of U.K. giants Standard Life and Aberdeen Asset Management three years ago. His focus will now be on streamlining its various brands into one that people will remember, and investing in data analysis and cutting-edge technology such as artificial intelligence and cloud computing.

Investor Flight

When the Standard Life Aberdeen merger completed in August 2017, the newly created firm had 670 billion pounds in assets. It’s since suffered withdrawals every year since the tie-up, with about 25 billion pounds pulled in the first half of this year. The company also lost its title as the U.K.’s largest stand-alone asset manager to Schroders Plc.

“I did the analysis and I could see, we’ve not been growing,” Bird said. “When you don’t grow, you have to ask yourself: wait a minute, how clear is my identity?”

Bird plans to harness his experience of 21 years at Citigroup, where his most recent role was head of global consumer banking. He stepped down from the lender last year after Jane Fraser rose to the bank’s No. 2 job, putting her in position to then succeed Michael Corbat as CEO. Bird’s name later came up among potential candidates to head HSBC Holdings Plc, a job that went to Noel Quinn.

Bird’s overhaul of Standard Life Aberdeen involves investment in key areas, such as developing inexpensive exchange-traded funds. The company will hire more staff to build up its ETF business, while also seeking to boost investments in assets such as private companies, infrastructure and real estate. It may opt for so-called bolt-on acquisitions of smaller companies to build its offerings.

Active Management

“I’ve got an M&A screen that I developed with team here,” Bird said. “I identified a gap. One was passive globally. We can either buy proprietary ETF technology, buy an ETF business or build it. The other gap was in private markets.”

Bird is still a firm believer in active management, saying that the coronavirus has shaken up and exposed weak businesses, giving stock pickers a chance to shine in some situations. But he insists that can’t be an excuse to be complacent about the potential of new technology that’s on offer.

“We are thinking of acquisitions but it won’t be traditional asset managers,” said Bird. “We don’t want to buy an old asset manager. Everything you see us do will look very 21st century.”

The merger that created Standard Life Aberdeen was meant to produce a firm capable of competing with the industry’s heavyweights. Martin Gilbert, one of its co-CEOs following the tie-up, said at the time that the goal was to amass enough assets to join the “$1 trillion club.”

Bird said that bar has been raised.

“Minimum efficient scale is larger than that now,” he said. “We’re focused on growing our business. The revenue line goes up and the expense line goes down. Once that starts to happen, you’re on the journey toward efficient scale. For me, I’m not into sort of vanity statistics. I’m absolutely driven by power metrics.”

spud

[boozey] 10/11/2020 22:45

MCunliffe thanks for your post - new CEO making an investment of over a £1M is encouraging. And enough to make me want to invest! Good yield and let's hope for capital appreciation too - the last few days have been a good start - albeit for reasons of market sentiment.

[mcunliffe1] 10/11/2020 16:08

Fenders, point 2 resonates with me as I’ve made that same point a few times in the past six months.

[fenners66] 10/11/2020 12:49

MCunliffe1

So many advocate share buy-backs where the received wisdom is reduce shares , increase EPS , increase share price - award directors a huge bonus... no wonder directors vote for it.

However there are counter arguments
1 EPS may be greater - all things being equal. All things of course are Never equal.
So they bought hi.
Did they start buying hi because of the announcement of a buy back?
Share price on any given day is a result of supply and demand - invent a huge artificial demand and price paid may well be too high.

2 They are an investment company asking the populace to lend them money to invest - whilst they had £billions of their own and did not know what to invest it in - so they don't trust their investment managers why should anyone else?

3 They purchase of shares - removes cash from the balance sheet - and often increases debt as the companies borrow to buy back shares.
QED enterprise value falls - so share price should too.

[tornado12] 10/11/2020 12:25

Green shoots of recovery starting. The transformation is if the vaccine is confirmed and rolled out over next few months. There could be 2 or 3 so 2021 should see a completely different future to the one we have seen this year. Wont count my chickens , but glad I kept my nerve and still will to invest in long term performance GLA

[mcunliffe1] 09/11/2020 16:22

Nick - I posted this a week or so ago on another SLA thread: thought it may be helpful to any who haven't read it previously.


With a bit of time to kill I have been looking back at the share purchase numbers at SLA.

The share buy-back started at about 14th August 2018. The share price was about 373p at that time and there were approx. 2979,559,515 shares in existance.

At 30th Aug 2019 the share price was 249p and the number at 2400,929,435. They'd purchased about 19% of their shares by that point.

At 31 Aug 2020 the share price was about 237p, the number of shares at 2241,101,532 and that means they'd bought about 6.6% of the shares available in the last year.

In total, they've bought a little below 25% of the shares that were in existance at the outset in Aug 2018.

The share price has of course plunged from 373 to 237 in that period. A drop of 36%.

A week ago, the share price was at 225 so since the start of buy-back we've seen a share price drop of almost 40%.

I'm trying to think positive here and wonder what the share price might have been without the buy-back.

But, I'm thinking that the 75% of shares that exist now compared to the 100% at August 2018 hold a far lower value per share. If profits can be maintained the divi should be safe - but then, if the belief that profits could be maintained would a much lower number of shares not attract a higher value?

Mad world.

UPDATE: Since I wrote the above the share price has jumped appreciably - partly in response to the COVID-19 potential vacine.

[mcunliffe1] 09/11/2020 16:15

C.I. - I really hope you are correct. However, this rise hardly reflects a specific improvement for SLA more of a market sentiment rise.

I'd like to see some real improvements at SLA resulting from strong management and leadership within the company rather than worldwide influences.

[chinese investor] 09/11/2020 12:20

Nightmare Over ?

[rathlindri] 05/11/2020 15:05

Rolling in it obviously