Buy dependable Schroders

Shares in Schroders currently trade at a premium to its rival listed managers because the company plays into all these trends. It caters for both retail and institutional investors and, in terms of investment strategies, its developed market equities, multi-asset and fixed-income funds are especially well situated given the trends in the industry.

And currently there is an opportunity for investors to get their hands on Schroders at a reasonable price. The fund manager's shares trade on a Bloomberg consensus multiple of 17 times the next 12 months' earnings. This falls just below the top quartile of its forward PE ratio for the past three years. So hardly cheap but, as the shares are not in the top quarter of its near-term historical rating, investors could take advantage of this momentary slowing of the train to jump aboard. If they do so, they will find a business in rude health. Profit before tax, excluding the effect of the acquisition of Cazenove in 2013, was up 17 per cent to £306m in the first half, compared with the same period in the previous financial year. That paid for a 21 per cent hike in the half-year dividend to 29p a share. What's more, net fund inflows of £8.8bn for the period were almost double that of the comparable period, with those inflows falling fairly evenly between retail and institutional business.

On the institutional side, the manager is continuing to build its base. Earlier this year the world's largest pension fund, Japan's Government Pension Investment Fund, handed Schroders, alongside Japanese fund manager Daiwa SB Investments, a mandate for domestic equity investment. The institutional investor's decision to pivot away from its traditional conservative bond-buying strategy both to chase higher returns and to support its home equity market was a major shift, and a great scalp for Schroders. The fund manager has also sold a lot of fixed-income mandates into Japan, demonstrating the strength of its distribution.

Closer to home, like fellow London-listed managers Jupiter Fund Management (JUP) and Henderson (HGG), Schroders continues to be boosted by renewed appetite for equities among European retail investors. Quantitative easing and a regional, if stuttering, economic recovery have encouraged investors to move more funds into the stock market, and a growing amount came Schroders' way in the first half.

An area that has further to go is wealth management, although Schroders has lost only one of the clients of Cazenove that it acquired in 2013. The integration of the teams is now complete and, while wealth management attracted net inflows of just £0.4bn in the first half, Schroders bosses say it is exceeding their expectations. "At the end of the year we set out a sales target of 2-3 per cent growth and we have actually delivered 5 per cent," says Schroders' chief financial officer, Richard Keers.

Schroders is also making sizeable investment in its systems, although Mr Keers declines to provide an annual sum. He highlights the company's robust margins - pre-tax profit was 32 per cent of net revenue in the first half of 2014, which rose to 36 per cent in the first half of the current financial year. "Within that, we are continuing to invest in our business," Mr Keers says, adding that the investment should allow the manager to build a more scalable business.