Schroders expands asset management reach with Lloyds Banking Group deal

Global asset management group Schroders, which manages more than $3 billion of catastrophe bond and insurance-linked securities (ILS) assets, has announced a tie-up with Lloyds Banking Group that will give it an expanded reach to new clients and an £80 billion wealth management mandate.

For Schroders and its exclusive ILS advisor Secquaero Advisors Ltd., the Zurich-based specialists in intermediation of insurance and reinsurance risk to the capital markets, the tie-up with Lloyds will broaden access to capital that could be attracted to the cat bond, P&C ILS and life ILS investment strategies the group operate.

Schroders plc and Lloyds Banking Group (‘Lloyds’) announced a strategic partnership to create a market-leading wealth management proposition, that will combine Schroders’ investment and wealth management expertise, as well as technology capabilities, along with Lloyds’ significant client base, multi-channel distribution and digital capabilities.

Schroders said that the arrangement will help it further expand its reach into the UK wealth management market.

Interestingly, the pair said they will establish a new financial planning joint venture company (JV) for wealthy clients and Lloyds will transfer around £13 billion of assets and associated advisers from its existing Wealth Management business to the JV.

The arrangement will also see high-net worth private client assets transferred to the JV as well, some of which may be attracted to ILS strategies we’d imagine.

In total, thanks to this tie-up with Lloyds, Schroders will take on the role of active investment manager for around £80 billion of the Scottish Widows and Lloyds insurance and wealth related assets.

António Horta-Osório, Group Chief Executive of Lloyds, commented, “I am delighted to be announcing this exciting partnership with Schroders and the creation of a new market leading wealth management proposition. This provides a strong platform for growth and is a further step in the delivery of our strategic objectives.”

Peter Harrison, Group Chief Executive of Schroders, added, “Wealth management is a strategic priority for Schroders. In combining our award-winning technology and world-class investment expertise with Lloyds’ significant client base and digital capabilities, we are creating a strategic partnership which is exclusively focused on the evolving needs of UK savers and investors. I am also delighted that we have been entrusted to manage £80 billion of assets for Lloyds’ and Scottish Widows’ clients.”

The increased reach for Schroders will inevitably assist in attracting new assets to its existing investment fund strategies, including the ILS and catastrophe bond funds under management with the assistance of Secquaero.

However, it’s important to note that investors in those strategies are largely sophisticated and Schroders range of ILS funds are not recommended for retail distribution.

However, in the high-net worth area of wealth management, ILS strategies are increasingly seen as a way for sophisticated high-net investors to access hedge fund and alternative sources of return, suggesting the wealth management JV could in future become a drive for ILS assets for Schroders.