Exane BNP downgrades Schroders to 'neutral'

While it remains positive on the long-term investment case for Schroders, Exane said its weak flow and fund performance momentum, lack of near term operating leverage and the lower likelihood of a change in capital return policy have led it to downgrade.

Exane said its long-term positive stance was based on diversity across asset classes, clients and geographies; Schroders’ exposure to multi-asset and wealth management and a strong pipeline of new funds/seeding.

“Nonetheless we see Schroders’ diversity posing some short-term challenges, in particular for the £72bn of AUM coming from Asia-Pacific clients (split roughly equally between intermediary and institutional, though this includes AUM from Japan and Australia), given the market backdrop.”

The French bank noted the region accounted for around 75% of group net flows in the first half of 2015.

“Schroders’ relative fund performance has deteriorated over the past six months, leading us to see the risk/reward on the stock as balanced.”

At 1008 BST, Schroders shares were down 1% to 2,498p.