Standard Life shares rise but GARS sees outflows

Added 9th August 2016

Standard Life shares were trading 4.4% higher at 332.6p despite Standard Life Investments’ highly popular Global Absolute Return Strategies fund reportedly seeing its first quarterly outflows.

 Standard Life shares rise but GARS sees outflows

The life company’s share was the second best FTSE 100 performer Tuesday morning, beating out competitors, Prudential, Aviva and Old Mutual Wealth.

The jump in share price occurred in spite of news that Standard Life Investment’s heavyweight £26.2bn Global Absolute Return Strategies Fund (GARS) had suffered from outflows within the second quarter.

Recent data provided by RBC Capital Markets showed that GARS’ second quarter outflow was the first every quartlerly net outflow recorded since the strategy has reached “a meanginful level of assets.” The heavyweight multi-asset fund rerturned a net outflow of £400m, which RBC points out fell below the consensus estimate of a £1bn net inflow but was better than their own predicted ouflow of £500m.

GARS represents 30% of Standard Life’s earnings and all inflows of the group, according to RBC analysts.

In light of the half year results, RBC analysts have maintained their “underperform” ranking on the stock.

“Looking ahead, we do not see a recovery in GARS and we expect that net outflows have accelerated since end June 2016.

“While the stock remains an expensive insurer, it appears cheap relative to its asset management peer group. However, a perceived reliance on a strategy which is not performing well justifies this ranking, in our view,” RBC analysts concluded. 

SLI’s multi-asset net inflows during the first half of 2016 were comparably weaker than the year before, generating only £0.6bn as opposed to £5.6bn.   

The investment group’s net flows over the period were also impacted by “weak” investment performance and a “challenging external environment,” generating only £0.9bn relative to £3.4bn in H1 2015.

The group’s wholesale business particularly struggled, losing £400m due to the increased level of redemptions its property fund saw post-referendum.

Despite this, Tuesday’s interim results pointed to growth in assets under administration for the company as a whole, as well as its investment arm.

Total AUA grew 7% over the first half of the year from £307.4bn to £328.0bn. Similarly, SLI saw AUA increase by close to 10.7% to £137.7bn compared with the previous year.

And IFRS profit increased significantly from £69m in H1 2015 to £226m in H1 2016.

Chief executive, Keith Skeoch, admitted that the “sharp market movements” of 2016 following the EU Referendum had undermined SLI’s recovery following challenging times in the first two months of the year.

“During 2016 uncertainty in the economic outlook did not favour our portfolios generally, which were positioned for a modest pick-up in economic growth.

“In the first half of this year we saw a very different mix of net flows compared to the first half of 2015. 

“While it would be rash to extrapolate the economic and political noise of the last six months, it is clear that the uncertainty that always accompanies economies, politics and markets will remain elevated. This will reinforce the global trends that are shaping the savings and investment landscape. Standard Life's long-term strategy is designed to take advantage of these trends,” Skeoch stated.

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