AUM grows by less than 1%
Schroders has so far enjoyed the effects of its strategic rebalancing, with the company delivering overall net new business of £5.7bn in the first half of 2023.
In its half-year report published today (27 July), CEO Peter Harrison said the net new business was due to the group’s shift towards higher growth and increased longevity areas, such as its wealth management, private assets and solutions businesses.
The firm’s wealth management business attracted £3.7bn net inflows from clients, while its solutions unit ended the six months with net inflows of £6.3bn, after recovering from the gilt crisis in the second half of 2022.
Schroders’ private assets division collected £1.8bn in net inflows and generated gross fundraising of £5.3bn in the first half of 2023, despite unfavourable market dynamics.
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Meanwhile, the firm said its mutual funds and institutional units “felt the impact of the ‘risk-off’ market sentiment” and saw net outflows of £800m and £5.3bn, respectively.
Despite the overall positive flows, the group’s assets under management, excluding joint ventures and associates, grew only marginally to £618.3bn from £616.5bn in the 2022 financial year. This slight growth came despite the strengthening of sterling, which reduced AUM by £21.7bn.
The currency impact was offset by both inflows and investment performance, which increased AUM by £17.8bn. AUM including joint ventures and associates decreased by 2% to £726.1bn, down from £737.5bn last year.
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Meanwhile, the firm ended H1 with £275m profit before tax, 12.6% less than in the same period last year, while net operating revenue was £1.1bn, including performance fees. Net operating income stood at £1.2bn.
“We are pleased with the positive progress in wealth management and solutions, which performed well during the turbulent period in the UK government bond market. Even with the uncertain market conditions, we experienced positive net new business in European and US mutual funds,” said Harrison.
“In recent years, our investment in the business has led to a robust operating platform with advanced technology capabilities at its core. We remain focused on effectively managing costs and maximising efficiency benefits from our platform.”
Strategic progress
In its results, the group highlighted steps it has taken to increase operational efficiency and that it has focused on targeted operating model improvements in its wealth service and group technology.
It has decided to relocate a number of roles from the wealth team in Switzerland to its UK hub in Horsham.
Schroders said it expected the move to deliver cost savings and help support its ambition to grow wealth management operating profit at a compound annual growth rate of 10% from 2022 to 2025, excluding the effects of markets, FX and acquisitions.
In group technology, the company is consolidating external contractors and third-party resources into one development centre to implement a more efficient resourcing model and manage capacity across multi-year projects in a more cost-effective manner.
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The firm said it was continuing to look at China as an important area for geographic expansion in its public markets business, following approval from the China Securities Regulatory Commission (CSRC) to begin operating a wholly foreign-owned public fund management company there.
The group added that it was continuing to evolve its operating model, building an efficient and robust platform to support future growth.
It said: “We remain confident in our ability to deliver on the targets we have set for wealth management and Schroders Capital. We intend to grow our market share in solutions and maintain our leadership in sustainability.”
The board has declared an interim dividend of 6.5 pence per share, unchanged from the 2022 interim restated dividend, which will be paid on 21 September 2023.
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