Group enjoyed strong retail inflows over 2006, up 340%, year on year, with income and small-cap funds proving popular with intermediaries
The past 10 years have given us such brands as Aviva, Consignia and Accenture. Yet when Standard Life Investments launched in late 1998, it chose to keep faith with its heritage as the investment arm of life and pensions giant Standard Life, rather than embrace the trend for names with a good ring but no practical meaning.
Despite this link with the past however, Standard Life Investments has grown both in size and strength, to the extent that four of the 20 best-performing unit trusts and Oeics in all sectors over one year to 2 April were from the group's stable.
Jacqueline Kerr, head of mutual fund investments at Standard Life Investments, said the three years leading up to the launch of the standalone company, starting with the arrival of Sandy Crombie as head of investments in 1995, saw a complete overhaul of the business and its processes.
"At the time, quite a few life companies were launching investment businesses, but a lot of those were quite cosmetic," says Kerr.
"We amended a lot of our processes and examined our culture. Sandy was key to that, along with Keith Skeoch, who came in as chief investment officer and became chief executive when Sandy went to Standard Life."
Research among intermediaries and consulting actuaries suggested that while Standard Life's investment business was good in certain areas, its customers wanted to see a more complete investment focus.
Central to Standard Life Investments' approach is its focus on change philosophy, which aims to understand what the drivers for change are and the triggers that will allow the market to bring these to a profitable conclusion for the firm's customers.
"The idea is that by focusing on change, you get valuable insights that will enable you to deliver returns. That is easy to say, but more difficult to live. Things that help include the strength of our research platform - fundamental research is very strong in Standard Life Investments - and the corporate access we gain through our size is important too."
"As well as the qualitative focus on change philosophy, the firm also has a quantitative matrix where it has back-tested a number of indicators - covering growth, value and momentum - over many years to see how predictive they are of performance."
Unlike many of the successful firms of the past decade, Standard Life Investments eschews star fund manager culture in favour of a team approach, where each manager has analyst responsibilities and each investment desk comes up with a winners list of their 20 best stock ideas. This ensures that the benefits of the research are delivered into the portfolios.
"Our fund managers meet regularly - and talk daily - to establish what is on the list," said Kerr. "It is an environment where people debate and argue over their best ideas: because to put a company on the list would mean taking another one off, the decisions are not taken lightly."
While all SLI's funds will contain a certain amount of stocks from the relevant winners list, the proportion will vary according to the mandate. For instance, Karen Robertson's UK Equity High Income has a yield requirement, so it is likely to hold fewer of the stocks on the list.
A clear mandate is vital, said Kerr, to enable SLI to articulate clearly to advisers and customers what the fund is there to do.
"Some of our funds are very high octane; some are less aggressive. We are here to provide a number of solutions that hopefully will meet the needs of our customers. I think we've been quite successful in that."
Kerr points to the AAA Income fund as an example of a fund meeting a need in unique fashion. By investing only in AAA-rated corporate bonds, its holders get a yield pick-up over gilts for minimal extra risk. "Within the UK Corporate Bond sector, the AAA Income fund will sometimes underperform, but as it is designed to outperform gilts, advisers are happy to accept that," she said.
Despite its lack of a star culture, managers Karen Robertson (UK Equity High Income) and Harry Nimmo (UK Smaller Companies) have a significant following among advisers, and are also enabling Standard Life Investments to grow its fledgling investment trust business.
Six months ago, Gordon Humphries was recruited as head of investment companies. SLI currently has four closed-ended funds compared with the 22 Humphries oversaw at F&C but the hire is a demonstration of Standard Life Investments' commitment to investment companies.
Having built the institutional, mutual fund and third-party sides of the business, Humphries said closed-ended funds are the next logical step.
"Investment companies can be a highly profitable part of a business and offer diversification," he added.
With Robertson now at the helm of the Equity Income trust (previously run by Deutsche/Morgan Grenfell), and Nimmo having turned around the fortunes of the Edinburgh Small Companies trust, which last year saw off activist shareholders with a 50% tender offer, Humphries is confident the quality of SLI's managers will enable it to win further mandates.
New launches are also a possibility, but only in areas where a closed-ended structure can add value, such as volatile and illiquid asset classes. Humphries mentions emerging markets as a likely target for future launches.
While the lion's share of Standard Life Investments' business - 71% of funds under management - still comes from its parent in terms of heritage business in with-profits and pension assets, the real growth for the company is in its third-party business. On the institutional side - through initiatives like its FunDChoices platform (see Investment Week, April 12, page 18), sales through consulting actuaries reached £3.3bn in 2006, up 24% on the previous year, with mandate wins including £840m from Citigroup and £225m from Cheshire County Council.
But it was on the retail side where growth was most spectacular: net inflows into Standard Life Investments' mutual funds in 2006 were £1.3bn, up 340% over 2005, and Kerr says 2007 could be even stronger.
With offices in Boston, Montreal and Hong Kong as well as its Edinburgh base, Standard Life Investments sees itself as a global firm rather than a Scottish one, and Kerr feels the brand has begun to be seen as one customers can really rely on and trust.
"We are delighted we are continuing to deliver strong performance; ultimately that is they key driver for any investment company, along with having the right funds for your customers and a strong brand," she added. "On each of those fronts, we are firing on all cylinders."