Schroders shares slide despite record high assets under management

Shares in Schroders were sliding on Thursday morning even after it announced a record high assets under management (AUM) of £773.7bn in its half-year results, up from £726.1bn a year earlier.

The FTSE 100 firm said the growth was driven by positive market conditions, robust investment performance, and £3.9bn in net new business (NNB), including contributions from joint ventures and associates.

Client investment performance improved significantly, with 69%, 62%, and 78% of assets outperforming their relevant benchmarks over one, three, and five years, respectively.

Wealth management saw a particularly strong performance, generating £3.7bn in NNB, equivalent to a 7% advised growth rate, which is considered market-leading.

Schroders Capital, the company’s private assets division, also delivered solid results, with gross fundraising increasing to £5.2bn, representing an annualised rate of 16%.

The division recorded £3bn in NNB, with positive inflows across all its core areas: private equity, private debt and credit alternatives, infrastructure, and real estate.

In public markets, positive net new business in fixed income was offset by a rotation out of regional equity strategies, resulting in a NNB mix that led to lower average fee margins for the period.

Total net operating income for the first half was £1.175bn, down from £1.212 billion in the same period last year.

Operating expenses declined by 1% year-on-year to £860.2m, benefiting from efficiency initiatives undertaken in 2023 and ongoing cost discipline.

The company’s operating profit stood at £315m, compared to £341.4m in the first half of 2023, while statutory profit before tax was slightly higher at £276.3m, up from £275.6m a year earlier.

It said the slight decrease in operating profit was partly due to a £17.8m reduction in performance fees and net carried interest.

Schroders also highlighted its strategic partnership with Phoenix Group to launch Future Growth Capital, a new UK investment manager aimed at unlocking private market investment opportunities for millions of pension savers.

The board declared an unchanged interim dividend of 6.5p per share, in line with the prior year.

“We are pleased to report increased assets under management and positive net new business in the first six months of the year,” said group chief executive officer Peter Harrison.

“Of particular note was the 7% advised growth in wealth management, improved fundraising in private markets, and a strong performance in fixed income.

“Whilst our solutions business was impacted by a large client outflow, it also secured some strong wins and mandate extensions.”

Harrison said the results were further validation that the company’s long-term strategic pivot was helping it to navigate the structural changes the industry was facing.

“Our capabilities in wealth management, private markets and solutions are enabling us to take advantage of the growth opportunities we have identified and to deliver the investment solutions that our clients need.

“As we look to the next six months, we will remain focused on delivering strong investment outcomes for clients, maintaining good cost discipline and continuing to innovate, using new technology and strategic partnerships such as the launch of Future Growth Capital with Phoenix Group, to maintain our leadership position as a global asset manager.

“We are encouraged by the new business opportunities we are seeing, notwithstanding the current backdrop of macroeconomic uncertainties and industry dynamics.”

At 0957 BST, shares in Schroders were down 8.04% at 361.2p.

Reporting by Josh White for Sharecast.com.