Aberdeen Asset Management has come under fire for the way its deal with Life Assurance Holding Corporation was conducted.
Criticisms centre on the appearance that negotiations were conducted behind closed doors preventing further bidders entering the fray.
Under the 10 year deal, AAM has paid £86m to manage £5.5bn on behalf of LAHC’s 750,000 policyholders.
But one asset management house, which wished to remain anonymous, said it and others in the investment community would have been prepared to pay more for less – £100m for only a three or five year contract – with effective performance-related fees.
The source said the performance-related clause in the AAM contract was “so weak it has no chance of being invoked”.
He added: “The deal is excessively generous in favour of AAM but not so good for LAHC’s policyholders. I don’t think they are sharing in the management windfall. If LAHC had advertised around the market they could of got a much better deal.”
But a spokesman for AAM said: “It all sounds like sour grapes to me.”
The deal will generate AAM an annual fee income of £11m in the first year alone and boosts its funds under-management by more than 19% to £34bn.
LAHC group finance director and company secretary Norman Reid claimed LAHC had done a huge amount of background research into possible partners and even had negotiations with several parties before agreeing terms with AAM.
However Reid confirmed LAHC had been very selective in which firms it decided to talk to. “We were extremely selective as any company would be. This wasn’t an open tender process because there were some parties we simply didn’t wish we talk to. We must take our own view as to the calibre of the people out there and the quality of their investment management.”
By Michael Schiniou
This week's edition of Professional Pensions is out now.
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