PE assets caught up in £109bn contract dispute

Private equity and infrastructure account for up to 5% of the Scottish Widows and Lloyds Banking Group assets managed by Standard Life Aberdeen.

Private equity assets form part of the investment portfolio at the centre of a dispute between Standard Life Aberdeen and Scottish Widows, Private Equity International has learned.

The £109 billion ($135 billion; €114 billion) portfolio of Scottish Widows and Lloyds Banking Group wealth businesses assets – managed by Aberdeen Asset Management, now Standard Life Aberdeen, since 2014 – comprise largely fixed income and equities investments, according to a source with knowledge of the contract told. There are private equity and infrastructure holdings within the portfolio, accounting for “less than 5 percent”, the source noted.

Further details of the private equity portfolio were unclear and Standard Life Aberdeen and Scottish Widows declined to comment on its composition.

Scottish Widows announced plans in February to terminate the long-term asset management arrangements with SLA after a 12-month notice period. The move followed Aberdeen Asset Management’s merger with Standard Life, a potential competitor of Scottish Widows, last year.

SLA disagrees with Scottish Widows’ decision. The firm offloaded its insurance business to Phoenix Group in a £3.2 billion deal one week after the Scottish Widows announcement, and released a statement on 8 May disputing LBG and Scottish Widows’ right to cancel the contract. It argued SLA is not in “material competition” in the UK with LBG and that neither LBG, Scottish Widows nor affiliates have the right to terminate the investment management arrangements.

“The parties are engaging with each other within the framework of the dispute resolution process envisaged in the [investment management arrangements],” the statement said.

The contract earns SLA around £129 million in annual revenue, or roughly 4.4 percent of the firm’s pro forma revenue last year, according to the statement. JPMorgan Asset Management, Schroders and BlackRock are among those reportedly in contention to replace SLA as manager of the assets.