Preliminary results for 2006 from Schroders paint a rosy picture of higher profits, gross margins up, a major step forward in private banking and two acquisitions which extend their offering in alternative investments. The headline figures are: group profit before tax at £290.0 million ($565 million) 2005: £250.7 million), up 16 per cent, with underlying profit up 26 per cent excluding a one-off payment received in 2005 for the termination of an outsourcing contract. Funds under management ended the year up 5 per cent at £128.5 billion (2005: £122.5 billion). In private banking, revenues were up 33 per cent to £98.5 million and underlying profit increased more than four times to £26.9 million (2005: £6.0 million). Revenue growth came from good increases in investment management revenues in London and Switzerland and significantly higher banking fees in London. The planned move of the back office operation to Zurich is stated to be on target and is expected to lead to improvements in both client service and cost effectiveness from the second half of 2007. Private banking now accounts for nearly 10 per cent of total profit, a significant increase on recent years attributed to a “distinctive offering for private clients drawing on a wide-ranging investment expertise and banking skills, a clear focus on the UK and continental Europe from our principal private banking offices in London, Guernsey, Geneva and Zurich, and tight control of costs”; the share of total profit is expected to increase. Net new business in 2006 amounted to £0.4 billion and funds under management ended the year at £8.6 billion (2005: £7.8 billion). In the asset management business, profit before tax was £219.0 million (2005: £193.9 million, £173.8 million underlying) based on higher margin products and sales channels. New business won in institutional came in on average fees which were 31 per cent higher than the fees charged on business lost and the higher margin Retail channel returned to growth with £3.8 billion of net sales. NewFinance Capital, the funds of hedge funds business acquired in May 2006, is stated to have made good progress: assets under management now total £1.9 billion. Long term opportunities are seen as organic growth in institutional, retail and high net worth channels, supplemented by complementary acquisitions. The acquisition of Aareal Asset Management, a German-based continental European property business, was completed at the end of February 2007. This is seen as a good strategic fit with the existing property business, which has £8.2 billion under management, predominantly in the UK. Schroders will integrate AAM’s existing funds and staff into its existing property business to become Schroder Property Investment Management Europe. William Hill, Schroders head of Property said: “The acquisition strengthens our existing property business, and adds over €2 billion of assets under management in seven property funds across European markets. In addition to the existing direct property and property security funds Schroders sells, we plan to launch two new funds in the months ahead which will offer our clients new European investmentt opportunities. This will give us critical mass in an asset class which is increasingly in demand by institutional investors.”