49 Interests in structured entities

A structured entity is an entity that has been designed so that voting or similar rights are not the dominating factor in deciding who controls the entity, such as when voting rights might relate to administrative tasks only and the relevant activities are directed by means of contractual arrangement. The group has interests in investment vehicles which, depending upon their status, are classified as either consolidated or unconsolidated structured entities. These interests are detailed under sections (i) to (iii).

All of the group’s holdings in the above vehicles are subject to the terms and conditions of the respective investment vehicle’s offering documentation and are susceptible to market price risk arising from uncertainties about future values of those investment vehicles. The investment manager makes investment decisions after extensive due diligence of the underlying investment vehicle, including consideration of its strategy and the overall quality of the underlying investment vehicle’s manager.

All of the investment vehicles in the investment portfolio are managed by portfolio managers who are compensated by the respective investment vehicles for their services. Such compensation generally consists of an asset based fee and a performance related incentive fee, and is reflected in the valuation of the investment vehicles.

(i) Interests in consolidated structured entities

Where the group has control over an investment vehicle, we have determined it to be a consolidated structured entity. The group currently consolidates Collateralised Debt Obligations (CDOs) with a market value of £1,120m (2013: £1,098m) at 31 December 2014. Details of the support which the group has agreed to provide these entities, in addition to the triggers under which it could be invoked, are contained within Note 13 (ii). The group has not, and has no intention, to provide financial or other support to any other structured entities which it consolidates.

(ii) Interests in unconsolidated structured entities

As part of its investment activities, the group also invests in unconsolidated structured entities. As at 31 December 2014 our total interest in such entities, reflected on the group’s consolidated balance sheet and classified as financial investments held at fair value through profit or loss, was £28,259m (2013: £16,560m). A summary of our holdings at 31 December 2014, with prior year comparatives, is provided below:

 

2014 Financial investments
£m

2013 Financial investments
£m

Debt securities

 

 

Analysed as:

 

 

Asset Backed Securities – Traditional

8,122

1,809

Asset Backed Securities – Securitisations and Debentures

12,329

7,086

CDOs

279

239

 

 

 

Investment funds

 

 

Analysed as:

 

 

Unit Trusts

3,950

4,052

Property Limited Partnerships

238

121

Exchange Traded Funds

147

122

 

 

 

Specialised investment vehicles

 

 

Analysed as:

 

 

OEICs

2,991

3,023

SICAVs

198

108

SPVs

5

Total

28,259

16,560

Where the Company does not manage the above investments our maximum exposure to loss to the interests presented above is the carrying amount of the Company’s investments. Given the Company’s limited exposure further information about the overall size of these entities has not been provided. Where the Company manages these investments the maximum exposure is the underlying balance sheet value, together with future management fees – these are covered further under Section (iii) below. The Company does not sponsor any of the above entities.

The group has not, and has no intention, to provide financial or other support to any other structural entities which it consolidates.

(iii) Other interests in unconsolidated structured entities

Management fees received for investments that the group manages also represent interests in unconsolidated structured entities. The group always maintains an interest in those funds which it manages. The group’s maximum exposure to loss with these investments equates to the underlying assets on the group balance sheet, together with future management fees. The table below shows the assets under management of those structured entities which the group manages, together with investment management fees received from external parties. The group’s holding in these entities is included within the amounts disclosed in section (ii).

 

2014

2013

 

AUM
£m

Investment management fees
£m

AUM
£m

Investment management fees
£m

Investment funds

15,906

111

23,598

144

Specialised Investment Vehicles

 

 

 

 

Analysed as:

 

 

 

 

OEICs

903

3

886

2

SICAVs

20,085

5

Property Limited Partnerships

2,066

7

2,036

6

Total

18,875

121

46,605

157