The level of net assets raised by Schroders fell 91 per cent last year, after Europe’s second largest listed fund company succumbed to the market volatility and competitive pressures that have triggered outflows at many of its rivals.
Although the London-headquartered fund company registered positive net inflows of £1.1bn last year, this was a sharp decrease from the £13bn of net new business it recorded in 2015, and lower than analyst expectations.
Schroders said that £4.3bn of net inflows from institutional clients were offset by outflows from wealth management and retail investors, who were affected by “macro uncertainty and volatile markets”. The outflows primarily stemmed from the company’s equity funds.
The company also confirmed that Philip Mallinckrodt, its head of private assets and wealth management, would step back from this role and become a non-executive director of the company he joined 20 years ago.
Schroders, which has seen its share price increase 16 per cent over the past 12 months, also registered a 6 per cent rise in pre-tax profit to £644.7m last year, ahead of analyst expectations.
The company has raised its total dividend for the year by 7 per cent to 93p per share.
Peter Harrison, who was promoted to chief executive of Schroders last year, said:
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.
Despite the slowdown in net new business, Schroders remains one of the few UK-listed fund companies to have registered positive investment flows last year.
Henderson, Ashmore, Aberdeen and Man Group all posted billions of pounds of redemptions in 2016 on the back of market turmoil and the widespread shift by investors away from actively managed funds in favour of cheaper passive alternatives.
Schroders has attempted to counteract this shift by developing funds that are difficult to replicate in an index-tracking format.
Last year the UK’s largest listed asset manager acquired an investment team focused on asset-backed securities, a niche area of the fixed income market, from Brookfield, the US fund house.
Mr Harrison previously told the FT the logic behind the Brookfield deal was to acquire investment expertise that was “very hard to disrupt through passive”.
Schroders also made strategic deals with Dutch direct lending firm Neos and US asset manager Hartford last year.
Schroders added in a statement:
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. Despite the challenges faced by the industry, we remain well placed to continue to build future growth.