Schroders has leapfrogged Standard Life Aberdeen to become the UK’s largest listed investment house after its assets under management rose 5 per cent, despite a challenging half-year that included a fall in pre-tax profits and volatile market conditions.
The London-based company said its assets under management at the end of June stood at almost £526bn, partly thanks to the takeover of the remaining £29.5bn of an already announced Scottish Widows mandate, which was previously run by SLA.
SLA, which took the crown as the UK’s largest listed asset manager from Schroders following the merger of the two Scottish businesses three years ago, had assets under management of £490bn at the end of April. This is down from £660bn when the tie-up was announced in 2017.
Peter Harrison, chief executive of Schroders, said the company’s half-year results were “particularly resilient” given this year’s “extraordinary period of market volatility and continuing social and economic uncertainty” because of the pandemic.
He added that Schroders had experienced steady growth in recent years, while many rival active managers in the investment industry were shrinking.
The company reported overall net inflows of £38.1bn in the first half, but sales of cheaper solutions products were stronger than high-margin funds. Overall net income was down 3 per cent year on year and profits before tax and exceptional items fell 10 per cent to £306.2m. It maintained its dividend of 35p per share.
Julian Roberts, an analyst at Jefferies, said Schroders’ “good cost control and positive AUM movement have not been able to make up for margin compression”. He added that fee compression and the company’s business mix was “keeping pressure” on the company’s balance sheet.
Paul McGinnis, an analyst at Shore Capital, said the results showed “good resilience but [this] was already captured in the share price”, which was largely flat in morning trading.
Despite markets rebounding after a sell-off in the first half, Mr Harrison said the global outlook remained difficult.
“We haven’t see the economic impact [of the pandemic yet]”, he said and added that he expected the economic numbers globally to “remain extremely tough” with a tug of war between government intervention and weak earnings.
As one of Europe’s largest investors, Mr Harrison also said he feared companies had yet to realise the huge changes in society caused by the pandemic. “We have seen a compete sea change in the world. The contract between business and society has changed. And I don’t think that is being reflected in how companies are talking about the first-half numbers,” he said.
Meanwhile, Man Group, the world’s biggest-listed hedge fund firm, reported $1.7bn of client outflows during the three months to June in a sign of pressure on the industry during the pandemic, even if the scale of withdrawals has not been the same as during the global financial crisis.
Man’s overall assets under management dropped 8 per cent to $108.3bn in the first half of the year, despite a rebound in the second quarter as markets rallied.
Chief Executive Luke Ellis told the Financial Times that he would be “staggered” if market volatility did not rise in September and October and that he saw further risks of “a lot of volatility” around the US presidential election in November.
“In a lockdown scenario with a higher proportion of people voting from home, it could take two, three, four weeks to get a result,” he said. “That’s not something that people are mentally prepared for.”
Man’s pre-tax profits in the six months to June dropped 40 per cent to $94m as performance fees earned on its funds slumped, although that was still ahead of market expectations. The group said investors pulled money from some of its computer-driven long-only and absolute return funds.
Hedge funds overall suffered $12.2bn of investor redemptions in the second quarter after net outflows of $33.3bn in the first three months of the year, according to data group HFR, although that is still well below levels seen during 2008 and 2009.
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