Monthly Market Report - April 2017

22nd March 2017

With commentary from David Stevenson

One obvious clue to a full throttle bull stockmarket is heightened M and A activity. One can almost sense the eager anticipation of dealmakers at big investment banks to get mega deals in the bag before the inevitable market slowdown. The deal between Standard Life and Aberdeen feels very late cycle. It’s no secret that Aberdeen has been hunting around for a partner for some time now and its alighted upon a close (geographically speaking) peer. The deal, to me, makes sense, but the bigger story is what the combined entity (assuming it goes ahead) will focus on: multi and mixed asset funds. Both groups are big players in this market (SLI’s GARS in absolute returns for example) and historic fund flow data suggests that the only major growth market for active asset managers is currently mixed asset funds. Obviously, Aberdeen will be able to sell it emerging markets funds to Standard Life’s extensive customer base but the big story will be how both sell all in one complete solutions to end investors. Standard Life’s MyFolio model is an example of what could emerge: simple, low cost multi asset portfolios mixing passive and active funds in one solution, sold direct or through IFAs. Therein lies the opportunity for structured product providers. How can they build an alternative to this funds based approach? The real battle won’t be around who’s got the best ‘investment’ structure for accessing growth in UK equities via the FTSE 100. Rather the battle will be about risk grades, maturity date funds and mixed asset solutions.

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