Strong client outflows define a poor first six months for the fund manager as it pins new growth on acquisitions in Europe and Asia.
Average assets under management fell by more than 2 per cent and net income fell by 5 per cent in lacklustre half-year results released by Schroders on Thursday as the group admitted to "a challenging environment".
While operating costs remained broadly unchanged, the firm reported a drop of 14 per cent in pre-tax profits to £319.3 million ($386.3 million), down from £371.1 million recorded a year ago. Assets under management grew by 9 per cent for the period to £444.4 billion.
The global fund manager said negative investor sentiment at the end of last year into 2019 saw total clieint net outflows of £1.2 billion, in marked contrast to the £1.2 billion of inflows seen in the same period last year. Schroders said the “risk off” sentiment was felt most strongly in the intermediary channel, which saw net outflows of £2.4 billion, principally from equity products. It said the institutional channel was more resilient recording net new business of £300 million.
Wealth management brought in net new business of £900 million through its two main businesses, Cazenove Capital and Benchmark Capital. The division generated net income of £144 million, marginailly up for the period, but pre-tax profits were down by 21 per cent to £30.1 million. Total AuM at the wealth arm stood at £50.7 billion to June, up from £43.7 billion at December 2018.
The fund manager noted that a £45 billion settlement was due from the Lloyds Banking Group following an asset-split deal involving Scottish Widows, owned by Lloyds. Group CEO Peter Harrison said the settlement would fund the second half of the year.
Harrison said the impetus in wealth advisory was partially coming from expansion in Asia and the purchase of the Singapore wealth division of Thirdrock Group, adding around £1.7 billion in managed assets. The group said it was also continuing to develop its private client offering in China.
In asset management, pre-tax profit was down by 14 per cent to £284.4 million, impacted by lower average assets under management, Schroders reported.
In other details, Harrison announced that Schroders Personal Wealth would launch in the wider market later in the year, and its majority stake in BlueOrchard Finance would expand asset management capabilities. Schroders agreed to purchase Swiss-based BlueOrchard last month in a bid to bring in more impact investing expertise.
Schroders said that its private assets and alternatives business would also get a boost from the purchase of German-based real estate business Blue Asset Management, giving the fund manager additional reach in the German, Swiss and Austrian markets. The German deal brings total private assets and alternatives under advisement to £39.3 billion, Schroders said.