Schroders eyes asset management acquisitions
UK – Schroders has reported a 27% fall in asset management profits but says it is on the lookout for acquisitions in the sector.
It reported that pre-tax profits at its asset management business in 2002 fell to 77 million pounds (111.7 million euros). Revenues at the division fell to 440 million pounds from 481 million pounds in 2001.
“With increasing cost pressures on asset managers and with valuations well below where they were two years ago, opportunities are likely to arise to deploy our surplus capital by way of acquisition to complement and accelerate organic growth,” the company said in its 2002 earnings report.
Schroder Investment Management is the seventh largest manager of European pension fund assets, with around 70 billion dollars in such assets under management.
Its funds under management ended the year at 88.3 billion pounds (128 billion euros) down from 110.4 billion (160 billion euros) at the end of 2001. “Most of this decline was accounted for by lower equity markets,” says Schroders.
Net outflows of funds were significantly lower than in 2001, with 2.2 billion pounds in 2002 compared to six billion pounds in the previous year. Institutional fund net outflows are reported as being 5.3 billion pounds, down from 8.8 billion in 2001.
In the UK, net outflows of 3.4 billion pounds were reported, although as a result of improved investment performance this figure was considerably less than 2001’s figure of 10.9 billion pounds. Schroders said it continues “to feel the effects of the industry-wide restructuring away form balanced mandates,” but these now represent les than 10% of total funds under management.
In the US, the three billion pound outflow from institutional funds was attributed to the weak performance of some asset classes, and this outflow is expected to continue in the short term. In the longer term, Schroders says it has taken steps to address the issue by strengthening the investment process underlying the asset classes, and has appointed a new chief executive in the US.
Business in continental Europe and Asia, on the other hand, was more positive. Net new business in continental Europe was 850 million pounds, and in Asia Pacific Australia, 700 million pounds.
In property and private equity, Schroders was also successful in 2002. It remains the leading manager of property unit trust in the UK, while profits from private equity were 12.9 million pounds compared to a loss of 8.1 million in 2001.
Going forward, Schroders says that it will continue to lower its cost base – total costs were reduced by about 50 million pounds in 2002, and a similar reduction is expected in 2003. Non-core activities will also be outsourced to improve investment performance.