Thursday 1 August 2019 8:39 am

Schroders profit drops amid weak investor sentiment

Schroders suffered a 14 per cent profit drop despite a rise in assets under management as it warned investors that it sees “headwinds across the industry”.

Read more: Janus Henderson struggles to shake client jitters as outflows mount up

The figures

Profit before tax fell 14 per cent year on year to £319.3m for the six months to the end of June, Schroders said.

Assets under management climbed nine per cent to a new peak of £444.4bn, up from the £407.2bn Schroders managed at the end of 2018.

Net outflows remained steep at £1.2bn, no change from last year’s figure.

The investment fund saw basic earnings per share fall 12 per cent to 92.4p per share.

Schroders kept its interim dividend steady at 35p per share.

Why it’s interesting

Outflows continued to hit Schroders’ revenue amid a wider downturn in the asset manager space.

Weak investor sentiment has also hurt rivals such as Jupiter Fund Management and Janus Henderson as investors pull cash out of these investment vehicles.

Still, Schroders pointed to a strong pipeline of new business and also scored a new high in assets under management.

Schroders also expects to receive around £45bn of assets from Lloyds in the second half of the year.

The pair agreed a joint venture last October to change the way Brits invest, combining Schroders’ offering with Lloyds’ 27m customers.

Schroders chief executive Peter Harrison told City A.M that the collaboration will produce a “new force” of financial advisers backed by “good technology” to streamline the support they can offer consumers.

Harrison described such wealth management services as a “big opportunity” for his firm, adding that the service aims to tackle what he called the “massive advice gap” in the UK.

What Schroders said

In a statement released with the results, Harrison said: “In a challenging market, we continue to broaden and enhance our range of investment capabilities to help meet our clients’ needs. We remain on track with our plans, giving us confidence that our diversified business model and global presence position us well to generate positive outcomes for both our clients and shareholders over the long term.”

Read more: Assets begin to slow at Jupiter as new boss sees assets grow

Speaking to City A.M., Harrison said he thinks the firm is in a “pretty reasonable place” despite the drop in profits.

He added that the retirement of two of Schroders’ significant fund managers had contributed to the firm’s first-half outflows, with cautious investors another contributing factor.

“Particularly in the first three to four months of the year, we were very much in a risk-off environment, with a lot of strong flows out of equities and a bit of a move towards fixed-income multi-assets. That’s abated – as you’d expect – as markets have normalised.”

Harrison said he is optimistic that “a lot of the uncertainties” facing the sector will soon be resolved, but believes that investors are becoming less cautious.

“There’s a lot of uncertainty in the world,” he continued, “but people have learned to live with that. People have realised the world goes on.”

“People have a need to save, and the money has to go somewhere. If anything, I think you’ll see saving becoming a bigger part of people’s existence.”