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Standard Life plc - Annual Report and Accounts 2007
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Investment management - New business and performance

New business

Third party FUM: £29.1bn in 05,£38.5bn in 06,£47.7bn in 07Strong investment performance and effective marketing have enabled us to deliver another year of strong new business growth. Third party funds under management (FUM) grew 24% to £47.7bn with net new sales of £7.9bn, up 23% on 2006. In-house FUM grew by 2% to £95.7bn, although with profits business continued to decline, albeit partially offset by new sales of £1.6bn, mainly in individual savings and pension products. Total FUM increased by 9% to £143.4bn.

In our UK business we achieved record sales for our mutual funds during 2007 despite some industry slowdown in the last quarter of the year in reaction to volatile market conditions, with momentum in the first half building on our core strength in Retail. Our Institutional business, which represents nearly 80% of total third party FUM has remained largely insulated from the effects of market volatility and has experienced another year of record flows in both corporate pooled products and segregated mandates.

This growth is firmly underpinned by our strong investment performance, delivered through the rigorous application of our 'focus on change' investment philosophy, and by our continuing commitment to very high levels of client service.

Performance

IFRS profit before tax reached a record level of £100m, an increase of 43% from 2006.

This was driven by strong underlying profit growth, up 19% to £83m (2006: £70m). Record flows of third party FUM, tight management of costs and careful control over the investment spend required to sustain our growth all contributed to this. Although income from in-house FUM was lower, earnings before interest and tax (EBIT) margin increased to 30% (2006: 28%).

In October, a 9.9% stake was sold in HDFC Asset Management Limited (HDFC AM) was sold, our joint venture with HDFC in India. This resulted in a gain before tax of £17m. The total cost of our original investment in this business was £17m. Also, in October, we reorganised our private equity business with the existing management team taking a significant (40%) minority stake in the future business. The business has strong momentum and we believe it is now well positioned for future growth.