Friends Life and Aviva merger spells bad news for asset managers

Channels: Managers, Outsourcing

Companies: Aviva, Friends Life, Axa, Schroders, Ares, MetLife, Pricoa

People: Mark Versey

Axa, Schroders, Ares, MetLife and Pricoa are among the asset managers that could lose their mandates to manage assets for Friends Life if a proposed acquisition of the UK life insurer by Aviva goes ahead.

In a joint statement released late on 21 November, Aviva and Friends Life said the deal "is expected to lead to a substantial increase in profits and assets under management at Aviva Investors through the addition, over time, of Friends Life's UK assets under management which are currently principally outsourced, materially increasing Aviva Investors' total assets under management."

Friends Life has around £90bn ($140bn) in assets, of which around £35bn is managed by Axa. Friends Life had already hinted, in its 2014 interim report, that it could dump Axa in late 2015.

Schroders earlier this year won a £12bn equities and multi-strategy fund mandate from Friends Life, which was previously run by F&C. The transfer of assets from F&C and Schroders is only expected to be completed this quarter.

Ares Management won a new £200m senior syndicated loans mandate from Friends Life in June.

Last year, MetLife Investment Management gained a £500m infrastructure mandate, while Pricoa Mortgage Capital, an investment arm of Prudential Insurance, was awarded £500m to invest in commercial real estate.

Friends Life management is backing the Aviva deal, which would see 0.74 Aviva shares exchanged for each Friends Life share, valuing Friends Life at £5.6bn.

Many of these recent mandates were overseen by Mark Versey, chief investment officer and managing director of Friends Life Investments, who quit in April to join Aviva Investors as director of client solutions.

Aviva Investors manages a total of £234bn, of which £192bn is internal and £42bn for external clients.

Friends Life Investments manages around £17.4bn in fixed interest assets.