The UK wealth manager reported a strong jump in first half-year profits and record AuM, with strong mutual funds activity. It operates in a number of regions including Asia.
Pre-tax profits jumped at Schroders by 33 per cent year-on-year in the six months to June reaching £373.9 million ($521.03 million). This was reflected in a strong mutual funds' performance, with the firm attracting £17.9 billion in net new business for the period and a 6 per cent rise in overall assets managed reaching £700.4 billion ($977.7 billion).
In wealth management, net income increased by 15 per cent to £214.9 million, principally driven by higher management fees. Pre-tax profit for the division rose by 10 per cent to £66.5 million, Schroders said in a statement yesterday.
The wealth arm added net new business of £1 billion in the first half of the year, down from the £1.3 billion in H1 2020, with total AuM ending the period at £76.3 billion. More than 50 per cent of new business (£0.6 billion) came from Schroders Wealth clients, and £0.3 billion through Benchmark Capital. Schroders acquired the remaining minority stake in the fast-growing London wealth manager earlier this year. Schroders Personal Wealth saw net inflows of £0.1 billion on the back of increased client referrals.
The group reported a total cost to net income ratio of 67 per cent, down from 70 per cent recorded in H1 2020, and based on a rise in operating costs to £837 million in the first half of 2021.
Group revenue was up by 24 per cent to £1,244.5 million, with the firm recommending an interim dividend increase of 6 per cent from 35 pence to 37 pence a share.
The firm marked climate solutions as an area where it is demonstrating “continued leadership” in sustainability and impact. Some of this work has been engineered through Schroders’ investment in Natural Capital Research, using its mapping tools to identify natural capital assets, such as land and forestry, to help offset carbon in this high-growth investment area.
In asset management, net income increased by 23 per cent to £1,024.1 million. Pre-tax profit stood at £334.5 million. The group's private markets business, under Schroders Capital, generated net new business of £2.9 billion; alternatives ended the period with net outflows of £0.4 billion; and Schroders' institutional business saw net inflows of £1 billion, where outflows from APAC-based clients were offset by inflows from US-based clients into fixed income products. Institutional assets increased by 6 per cent to £169.5 billion (from £159.8 billion in 2020).
Client investment performance remained strong with 87 per cent of assets outperforming their relevant comparator over one year, 75 per cent over three years, and 82 per cent over five years, the firm reported.
“The business performed strongly during the first half of the year, delivering a 33 per cent increase in profits. These results reflect the benefit of our organic growth initiatives, strong investment performance and our leadership position in sustainability," group chief executive, Peter Harrison said.
Harrison said that AuM, reaching a new high of £700 billion, reflected demand for higher margin equity focused mutual funds, "especially from clients in the US and Continental Europe."
"Markets have benefitted from a combination of low interest rates, quantitative easing and a belief that inflationary pressures are transitory. If these pressures persist, or indeed the recovery in economic growth disappoints, we would expect increased market volatility,” he added.
“The group’s first-half performance leaves it well positioned to weather the storm of any upcoming economic turbulence that may occur as the result of a pandemic resurgence or slow recovery. The company’s recent investment into Natural Capital Research should drive its strategic focus and leadership in sustainability, which is likely to be highly attractive to investors, and commitments to organic growth initiatives in China and North America should support continued expansion," Rob Murphy, managing director, Edison Group, said.