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Aberdeen signs deal to buy SWIP from Lloyds Banking Group

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Aberdeen Asset Management has signed a deal with Lloyds Banking Group to buy Scottish Widows Investment Partnership (SWIP) that will see its ethical and responsible assets climb to over £730m.

Once complete, the takeover will mean Aberdeen will be the largest independent fund manager in Europe.

The £550m transaction, announced on Monday, involves Lloyds taking on a 9.9% stake in Aberdeen. SWIP said the news meant it would be “better able to develop and commercialise further the strong capabilities that exist within [its] business”.

Aberdeen, which managed around £200 billion of funds before the deal, will see its assets grow by some £136 billion.

This includes three ethical and responsible investment funds. Cindy Rose, Aberdeen head of SRI research, spoke with Blue & Green Tomorrow about its Ethical World fund in March 2012.

Shares in Aberdeen closed nearly 15% higher in London as a result of the transaction.

Martin Gilbert, chief executive of Aberdeen Asset Management said, “[The deal] strengthens our investment capabilities and adds new distribution channels; the acquisition of SWIP adds scale to our business across a range of asset classes; and it also introduces a strategic relationship with Lloyds Banking Group.

We are confident that this transaction will deliver considerable additional value to our expanded client base and this will therefore benefit our shareholders.

I am delighted to welcome Lloyds as a major shareholder in the Aberdeen group and we look forward to working with them to deliver value through this new strategic relationship.”

On its website, SWIP says it “manages a series of specialist ethical and environmental funds – totalling approximately £440m”. Craig Bonthron, co-manager of the SWIP Islamic Global Equity fund, which consults sharia law when choosing its investments, spoke to Blue & Green Tomorrow in March 2012.

This, added to the estimated £280m invested across Aberdeen’s three existing ethical and responsible funds, means the fund house now manages around £730m of responsible assets.

Despite this, Julian Parrott, a partner at financial advisory firm Ethical Futures, described the merge as “disappointing”.

As both parties offer a screened fund, I presume that the offering may be reviewed”, he said.

“The expertise lies in differing places – Aberdeen on traditional ethical and SWIP on environmental issues. A win would be a larger quite of funds, but I fear that rationalisation is more likely.”

Parrott added, “Aberdeen’s star has been dimmed of late, with indifferent performance in the past few years and the move away from a dedicated manager, to moving the mandate to the global equities team. It will be interesting to see what the plans are for the screened funds.”

Lloyds, which is 32% taxpayer-owned, confirmed that while the ownership of SWIP would be transferred to Aberdeen, the group would retain control of Scottish Widows.

Note: this article was updated to include Julian Parrott’s comments.

Further reading:

It’s time to pull our heads out the sand, says SWIP fund manager

A seriously ethical approach to investment

Record high £12bn invested ethically in the UK

63% of UK investors want to be offered sustainable investment options

The Guide to Sustainable Investment 2013

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