Aberdeen breaks Virgin ground in UK distribution

Martin-GilbertOne of asset management’s most prolific deal makers in recent times, Martin Gilbert, has done it again. Aberdeen Standard Investments, of which he is co-chief executive, has signed a deal that will increase the firm’s retail distribution footprint in the UK.

Aberdeen Standard has struck a joint venture with Virgin Money, which includes the asset manager planning to take a 50% stake in Virgin Money Unit Trust Managers for £40 million (€45.5 million) if regulatory approval is given.

Virgin Money has over 200,000 retail investment customers and £3.7 billion of assets under management.

The firms say the joint venture will broaden Virgin Money’s retail investment proposition and extend Aberdeen Standard’s business to Virgin Money’s investor base.

Gilbert, said: “We’re delighted to be partnering with Virgin Money to develop their retail investment business. Their customer focus mirrors that of Aberdeen Standard Investments and we look forward to working together and sharing a strong and profitable relationship over many years to come.”

Jayne-Anne Gadhia, chief executive at Virgin Money, said the deal was “expected to generate significant growth in assets under management, drive additional capital-light returns and to be game-changing for our investment business over the longer term”. 

However, Jonathan Miller, head of UK manager research at Morningstar, said: “It remains to be seen whether the announcement of the joint venture between Aberdeen Standard Investments and Virgin Money will deliver the best outcome for investors.”

He said Virgin’s UK Tracker was the “most outrageously expensive UK tracker”. The fund has an ongoing fee of 1%, compared to the Aberdeen UK All Share Tracker which has a 0.22% fee for the clean share class.

The Virgin tracker, which has underperformed the Aberdeen tracker by a cumulative 7% over the last eight years, according to Miller, “clearly needs to have its ongoing fees slashed”.

“We are hopeful that the benefits of scale and broader product range the joint venture brings ultimately generates a more positive outcome for end investors.”

Meanwhile, the transaction is expected to complete by the end of 2018.

Gilbert, a founder of Aberdeen Asset Management, co-leads Aberdeen Standard with Keith Skeoch as a result of a merger completed in August last year.

Aberdeen’s other deals have been acquisitions, including Advanced Emerging Capital in 2015.

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