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UK fund firm Schroders tops forecasts on strong inflows
[LONDON] Schroders, Britain's biggest listed asset manager, posted forecast-beating first-half profit on Thursday, helped by strong demand for its fixed-income products and sending its shares higher.
Fund firms globally have taken in billions in new money over recent months as investors search for higher returns amid low interest rates, taking on higher levels of risk and pushing some markets to record highs even though growth remains patchy.
That helped Schroders' pretax profit for the six months to end-June, adjusted for the costs of previous acquisitions, rise 17 per cent to 305.7 million pounds (S$654 million), beating a company-supplied consensus estimate of 300 million.
Shares in the company were up 2.3 per cent to 3,161 pence by 0730 GMT, continuing a strong recent record of outperformance against peers. "We think growth in line with or slightly better than the sector average is reasonable over the long term," analysts at Numis said in a note, flagging an "add" rating and 3,505 pence target price. "We believe it is likely to outperform, possibly significantly, in weaker markets. We continue to regard Schroders as a core sector holding for the long term." The strong performance mirrored that of peers including Jupiter Fund Management, Rathbone Brothers and St James's Place, who have this week all reported increases in new business.
Net flows of cash into Schroders' various funds, which focus heavily on equity and multi-asset, along with fixed income, emerging market debt, commodities and real estate across the globe, hit 8.8 billion pounds, up from 4.8 billion a year earlier and beating consensus estimates for 8.1 billion. "We had positive net flows in institutional, intermediary and high net worth," Chief Executive Michael Dobson told Reuters. "We had 4.8 billion of net new business in fixed income, which was a very strong performance." Total assets under management rose 14 per cent to 309.9 billion pounds, from 271.5 billion last year.
While net flows had been positive across its different funds, Schroders gave a cautious outlook, based on increased market volatility that would likely depress investor sentiment. "In the short term, with continuing uncertainty in the eurozone and China and the prospect of interest rate rises in the US, market volatility is likely to remain high, which may impact retail investor demand in particular," the company said in a statement.