Schroders seeks wind in its sails

Schroders (SDR) has always been the bluest of blue-blooded asset managers. The ability to handle large mandates has always proved popular with institutional investors and pension funds, while a reputation for discretely successful performance has always ensured a steady flow of clients. However, even the most polished brand needs some sort of new development to stay ahead of the game and these results are the first since Schroders went shopping and brought in a whole load of funds to attract the ethically minded investor.

The 75 per cent stake in Greencoat, a specialist in renewables infrastructure investment, bought for £358mn, plus £120mn in performance-related earnout fees, feels like an attempt to diversify Schroders' own brand at a time when thematic investing has proved to be all conquering in terms of attracting client funds. The deal was one of three completed, including bits of River & Mercantile and Cairn Real Estate, that added £51.9bn of assets under management (AUM).

That boost was important as it allowed Schroders' total AUM to remain stable at £773bn in a half where market value falls, offset partly by positive currency movements, topped £87.9bn. However, it was not enough to offset the decline in performance fees as market conditions slashed per valorem payments, which halved to £21.5mn over the period. But expenses seem to be under control and, the price of the acquisitions notwithstanding, Schroders’ cost-to-income ratio stayed stable at 67 per cent.

The analyst reaction was somewhat sceptical of its change of direction. Panmure Gordon described the results as “Bling” in a note and said it remained to be seen whether Schroders’ embrace of private assets, green technology and even crypto would offset the pressures in its core business.

The broker has Schroders down for EPS of 171.8p for 2022, rising to 189.9p in 2023, giving a price/earnings ratio of 16, falling to 15. This valuation puts the asset manager in the middle of the road between the bombed out generalist managers and higher rated, though also bombed out, specialists. That looks fair given its “steady as she goes” reputation but, being such a large fund group, Schroders is a market proxy and only a general recovery will put a shine back on the shares. Hold.  

Last IC View: Hold, 3,047p, 2 Mar 2022