BlackRock has struck an asset management agreement with Lloyds Banking Group subsidiary Scottish Widows to manage £30bn of passive index strategies, under the terms of a wider collaboration agreement on alternative assets and tech.
The agreement follows the group’s decision at the beginning of the year to pull a £109bn contract from Aberdeen following the company’s merger with Standard Life.
“BlackRock has been selected following a competitive tender process in which it clearly demonstrated its market leading capabilities in passive strategies which will ensure that we can continue to deliver excellent service and investment performance for our customers,” Scottish Widows said in a statement.
The wider collaboration is expected to include access to BlackRock’s advanced Artificial Intelligence technology, to handle retail client funds in line with their risk preferences.
The decision was taken due to competition issues triggered by Aberdeen’s merger with Standard Life in August 2017, leading to the creation of Standard Life Aberdeen (SLA).
SLA challenged Lloyds’ decision to terminate the contract and is currently undergoing an arbitration process.
Lloyds said that it is confident in its rights to scrap the existing asset management contract and expects the arbitration to be wrapped up by early 2019.
Scottish Widows also noted that it is “near to finalising arrangements” for the balance £80bn of assets in question.
Antonio Lorenzo, chief executive of Scottish Widows and group director of Insurance & Wealth, said:”The partnership will ensure that Scottish Widows and the Group can deliver good investment outcomes for its customers over the coming years”.
Meanwhile, Lloyds Banking Group is expected soon to conclude a deal that would mean the remaining £80bn from the fund, which is actively managed by investment specialists, will be placed with Schroder, the London-based global asset manager.
Both the £30bn and the £80bn funds will be shifted once the arbitration between Scottish Widows and Standard Life Aberdeen has been completed.