Schroders assets up 27% despite £2.9bn intermediary redemptions

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Schroders has reported a 27 per cent rise in assets to £397.1bn, spurred by sterling weakness.

As net income, profit and assets under management and administration reached record levels, in its annual results to 31 December 2016, the group said the weakness of sterling increased its assets under advice and management by approximately £42bn.

Profits before tax and exceptional items were up 6 per cent to £644.7m.

The period saw net inflows of £1.1bn, despite the “headwinds” facing the asset management industry.

While Schroders’ intermediary sales channel reported net redemptions of £2.9bn, largely from equity products, AUM for the channel still closed at £120.1bn, up from £100.9bn last year.

The group added unpredictable markets would continue to weigh on client demand in this sector, but it had confidence its diversified business model and “willingness to invest behind the business” ensured it was well placed to “build future growth”.

The results also reveal the price tag for Schroders’ acquisition of a stake in Benchmark Capital, the firm behind adviser network Best Practice, chartered IFA Aspect 8, network and chartered financial planning firm Evolution Wealth, its platform Fusion Wealth and technology firm Creative Technologies in November.

Schroders paid a total of £85.6m for the stake, split between a £80.6 cash payment and £5m in shares.

Pipeline business

In asset management, net operating revenue was up 7 per cent, from £1.39bn to £1.49bn, including performance fees of £38.8m.

Profits before tax and exceptional items were up 6 per cent from £540.5m to £572.4m.

Schroders’ wealth management arm reported an 8 per cent increase from £207.3m to £223.3m, including performance fees of £2.4m – up from £600,000 last year.

Profits before tax and exceptional items were up 8 per cent from £61.3m to £66.4m.

Group chief executive Peter Harrison says: “We have made good progress against our strategic objectives and see a number of future growth opportunities.

“Our diversified business model, a strong financial position and willingness to invest behind the business means we are well placed to take advantage of these opportunities, despite the challenges faced by the industry.”

The board is recommending a 10 per cent increase in its final dividend, taking it from 58p per share to 64p per share, bringing the total dividend for the year to 93p, an increase of 7 per cent.

It will be paid to shareholders on the register at 31 March on 4 May 2017.

Harrison adds: “The year has started well, but we are mindful of industry headwinds and that market returns remain difficult to predict. This is likely to weigh on client demand, particularly within the Intermediary sales channel, and create volatility in flows in the medium term.

“Conversely, amongst institutional clients, we see a pipeline of business which is focused on long-term asset allocation to meet their specific investment needs.”