SLI chief Keith Skeoch to be quizzed on defection

STANDARD Life Investments chief executive Keith Skeoch will face further questions this week over the surprise departure last month of one of his senior investment directors to rival Aviva.

Keith Skeoch of Standard Life Investments. Picture: Contributed
Keith Skeoch of Standard Life Investments. Picture: Contributed
Keith Skeoch of Standard Life Investments. Picture: Contributed

Euan Munro, the architect of SLI’s flagship Global Absolute Return Strategies (Gars) fund, jumped ship to take over as chief executive of Aviva Investors in January.

Speaking at the time, Skeoch said SLI’s “team-based culture” would allow the fund manager to absorb Munro’s departure with “minimal disruption”.

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Guy Stern, who Munro had recruited in 2008, was immediately appointed as his replacement.

Even so, the City will press for further assurances that SLI’s complex Gars operation – with a team running roughly 30 investment strategies simultaneously – remains firing on all cylinders.

Munro’s departure followed the loss in September of Richard Batty, Dave Jubb and David Millar, who left to launch a multi-asset team at rival firm Invesco Perpetual.

Noting that SLI was responsible for generating a significant proportion of Standard Life’s net inflows, Charles Stanley analyst Nic Clarke said the market would be looking for further commentary on the “unexpected announcement” of Munro’s departure.

Skeoch is due to join Standard Life group chief executive David Nish when he unveils the Edinburgh-based insurance and pensions giant’s half-year results on Thursday.

Analysts expect further strong growth, driven in large part by SLI, which is benefiting from large inflows of money managed on behalf of third-party institutional and retail investors.

Much of that cash is being channelled through the Gars fund, which has grown to a mammoth £18 billion in the five years since it was launched at the height of the financial crisis.

Designed to produce returns in all market conditions, Gars has proven exceptionally popular amid turbulent market conditions.

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Standard Life’s offering is arguably among the best in the industry, having produced a 42 per cent return during the past five years.

Eamonn Flanagan, an analyst at Shore Capital, described the Gars product as “very important” for Standard Life, thus raising questions as Munro prepares to take up his new post at Aviva Investors.

“But it is certainly a plus for Aviva in terms of making that a serious profit generator, which it hasn’t been,” Flanagan added.

Munro has been tasked with improving the £274bn investment arm’s profitability by Aviva chief executive Mark Wilson, who took over in 
January after the previous incumbent, Andrew Moss, was ousted during a shareholder rebellion over company pay and performance.

Like Standard Life, Aviva will also present its first-half results on Thursday in what will be a busy week in the insurance reporting season.

While improvements are expected in some areas of the business, the overall picture will be patchy as Aviva is in the early stages of its recovery after a long period of under-performance.

“Aviva will be interesting because they are at the start of a very long journey,” Flanagan said.

“Although he spoke a bit at the first-quarter update, these are the first set of proper numbers to be presented by the new chief executive.”

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Investors’ focus will be the interim dividend, which will be cut in the wake of Wilson’s stunning decision in March to slash the full-year payment by 44 per cent.

Wilson said Aviva expected the 2013 interim dividend to “rebase in line with the percentage reduction” to the year-end payment for 2012.

The announcement sent Aviva’s shares tumbling.