Schroders’ M&A spree and investment in private assets has helped it defy challenging markets over the first half of the year, which resulted in St James’s Place suffering a rare slide in funds under management.
Between January and June, Schroders’ assets under management grew by £48.1bn to £773.4bn, despite negative market movements wiping £53.7bn off its total.
Shares in the FTSE 100 fund group leapt 6% within the first hour of trading to £28.88 a piece, making it one of the biggest FTSE 100 risers on the day.
Despite a worsening global economic outlook, sparked by the war in Ukraine, higher inflation and rising interest rates, investors funnelled £8.4bn into the FTSE 100 fund group, with all three of its business divisions registering net inflows.
AUM was also bolstered by its acquisitions during the period, largely River and Mercantile’s solutions business, which added £43.1bn to its total.
Schroders’ newly combined solutions business took in £6.3bn of net inflows, higher than any other segment in its asset management arm, taking assets to £225.7bn by the end of June. Its private assets and alternatives business was the next best in terms of flows, attracting £4.3bn.
Assets added from its M&A deals, which also included Greencoat Capital and Cairn Real Estate, offset £2.9bn of redemptions from its mutual funds and £7.6bn in outflows from institutional mandates.
While AUM across asset management nudged up 2% to £664bn, its wealth management business saw assets tumble from £116.3bn to £109.4bn.
Within this segment, Schroders Personal Wealth contributed £200m of net new business and £3.2m to net operating income. Assets currently stand at £135.9bn.
Flat net inflows a good result for SJP
SJP was not immune to the sharp sell-off in global markets, which shaved £11.7bn off its total assets.
The UK’s largest wealth manager closed out the first six months of the year with £142.3bn in funds under management, a sizeable drop from its £154bn total at the end of December 2021.
However, net inflows of £5.5bn were flat compared to a year ago, which analysts at Jefferies hailed as a positive result against a challenging backdrop.
“Flows and FUM held up well in difficult markets, one of the reasons we like advice businesses,” it said in an analyst note.
“Against a tough comparator, for both to be flat year-on-year is a strong result, and while markets took a toll, the overall FUM figure is robust. 96.5% retention shows that business is still relatively normal, and if decisions not to invest have slowed, so have decisions to disinvest.”
Despite the dip in FUM, net income increased 8%, year-on-year, on higher earning fee assets.
SJP’s efforts to curb costs also put it in a better position to withstand the turbulent H1 2022, Jefferies highlighted.
CEO Andrew Croft (pictured) said the wealth manager was still on track to rein in growth in controllable expenses to 5% for 2022.
“We enter the second half of the year with a growing partnership ideally placed to continue helping clients in these uncertain times. Financial advice is needed now more than ever given the challenges facing individuals, both in the short- and long-term,” he said.
“Given current market conditions, we now expect full year gross and net flows of around £18bn and £11bn respectively, which would make 2022 our second highest ever year for flows and put the business even further ahead against our 2025 business plan objectives.”
SJP’s share price was up 3% at £11.87 earlier in the day, before settling back down to £11.69.