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Standard Life outflows persist as investors flee markets

London

STANDARD Life Aberdeen plc is still hemorrhaging client cash.

Redemptions reached a net £16.6 billion (S$29.3 billion) in the first half in the latest sign that investors remain nervous about market volatility and economic uncertainty. It's more bad news for a company that was created in a merger a year ago, only for Lloyds Banking Group plc to announce plans six months later to pull the Scottish firm's biggest mandate.

"Conditions for the asset management industry continue to be challenging," Standard Life co-chief executive officers Martin Gilbert and Keith Skeoch said on Tuesday. "We are actively taking steps to improve our investment performance in key areas."

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The pain suffered by Standard Life is symptomatic of the woes of Europe's asset-management industry, where client outflows are adding to long-felt issues ranging from squeezed margins and regulatory headaches to competition from cheaper passive funds.

The company said it would accelerate a share buyback programme, with a first tranche of £175 million to commence in the coming days.

The two companies that formed the asset manager had been losing client cash even before the August 2017 merger. The old Standard Life had £3.7 billion of net outflows in the first half of last year as clients pulled money from its flagship fund, while Aberdeen Asset Management also headed into the marriage shedding investor cash.

"Net flows remain a challenge, but it is encouraging that these are concentrated in a narrow range of strategies," the company said in the statement, adding that investors put money into its "new active" strategies.

While consolidation promised some benefits, the example of the Edinburgh-based firm shows that mergers can create as many problems as they solve.

When Lloyds gave notice of its plan to withdraw £109 billion, it said it was because the Aberdeen-Standard Life tie-up put the money manager into competition with the bank's own insurance unit. Standard Life is challenging Lloyds' decision.

Aberdeen Standard Investments, the asset management unit, had net outflows of £19.2 billion in the first half. The market had expected £17.8 billion, based on 16 analyst forecasts compiled by the money manager. BLOOMBERG