Schroders Profit Dips In First Half Even As Assets Rise

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Schroders today posted a 10 per cent fall in profit before tax and exceptional items in the first half of the year amid rising outflows in mutual funds and a contraction in revenue margins.

Britain’s largest-listed fund manager by market capitalisation reported £306.2m in profit before tax and exceptional items for the first half of 2020, down from £340.4m in the same period last year.

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Net operating revenue was down two per cent to £971.6m and net income slipped three per cent to just over £1bn.

Assets under management rose instead by five per cent to a record high of £525.8bn, ahead of a company-compiled analyst consensus of £519.4bn.

Why it’s interesting

But its mutual funds business was under pressure, with assets under management down to £94.1bn and nearly £5bn of net outflows in the unit, up from £1.8bn last year.

Schroders, which is a big investor in British companies, is trying to navigate the economic fallout of the COVID-19 pandemic which is making it harder for money managers to continue turning savings into investments as most retail investors are wary of taking on risk.

Jefferies analysts said the company’s ability to control costs and a rise in assets under management have not made up for margin compression which is putting a strain on the balance sheet.

British rival Jupiter Fund Management posted an 8 per cent fall in assets under management in the first half of the year, with total assets sliding to £39.2bn from £42.8bn at the end of December.

Schroders’ share price rose almost one per cent to 2,110p.

What Schroders said

Schroders boss Peter Harrison said the company’s diversified business model helped generate £38.1bn of positive net new business and that the firm had a strong capital position.

“We saw client demand for solutions strategies as well as momentum across wealth management,” he said.