Standard Life exits cash funds market

Standard Life Investments (SLI) has exited the money market funds sector, citing the "substantial" regulatory and capital burden upon the vehicles.

It said it has developed a proposal which allows Global Liquidity Funds (GLF) shareholders who wish to continue having their funds run on a constant net asset value  (CNAV) basis to do so in similar funds managed by Deutsche Bank Asset Management.

It anticipates the transfer will take place at the end of next month and expects about £3.5bn of the £6bn currently invested in the GLF's CNAV funds to transfer.

Total third party AUM will likely to be reduced by about £4bn in comparison with the position at the end of last year, it added.

In January last year, the FSA fined Standard Life £2.45m for misleading customers about the safety of one of its cash funds.

The City watchdog said the firm was guilty of "serious failings" after issuing marketing material that suggested its Pension Sterling fund was a low-risk deposit-style cash fund appropriate for people approaching retirement.

In reality, it was invested in toxic mortgage debt which plummeted in value.

Meanwhile, net inflows to SLI's third party business fell 40% in Q1 compared to a year earlier.

In a quarterly update, it said inflows were £1.2bn in the three months to the end of March, down from £2bn in the first quarter of 2010.

It said sales were driven by demand for higher margin wholesale, fixed interest, GARS and real estate products, partly offset by outflows from UK segregated funds.

The insurer's long term savings business reported strong new business, with sales up 25% to £5.8bn for the quarter compared to £4.6bn a year earlier.

Long-term savings net inflows were up 29% to £1.3bn, an improvement of £0.3bn on Q1 2010.

Within this, quarterly UK corporate pension net inflows were up 85% to £559m from £302m in 2010, and UK individual SIPP net inflows fell slightly to £553m from £566m in 2010, with customer numbers up 6% to 113,800.

Assets across Standard Life's Wrap, Fundzone and Sigma propositions passed £10bn in the quarter. Wrap AUA increased by 13% to £7.5bn in the first quarter and by 70% compared to 31 March 2010.