Schroders’ assets near $1 trillion, aided by low interest rates

Schroders’ assets near $1 trillion, aided by low interest rates

Low interest rates are bolstering money managers like Schroders (SDR.L), its chief executive said on Thursday as the British firm posted a jump in first-half profits and record high assets under management of 700.4 billion pounds ($977.7 billion).

The low rate environment has been a major driver of flows into equities while competing assets of cash or fixed income were “very unattractive”, CEO Peter Harrison said.

Robust investor sentiment amid trillions of dollars in government stimulus has also helped, with Schroders saying demand for its mutual funds and higher margin equity products increased.

“Savings rates are higher but many of the flows have also come from institutions, so I think the key driver will be interest rates remaining low and markets remaining stable,” Harrison said.

Schroders, which lifted its interim dividend by 6% to 37 pence a share, said pretax profit rose 33% to 373.9 million pounds ($521.03 million) for the six months ended June 30. It booked in net new business of 17.9 billion pounds.

The company said total assets under management climbed 6%, with strong demand for its higher margin equity-focused mutual funds, especially from clients in the United States and continental Europe, helped by rising markets.

Financial updates from three other asset managers this week also showed inflows running at billions of pounds.

However Harrison said he was mindful of the fact that markets had “travelled up a long way”.

“There is clearly lots of evidence, particularly in private markets of a bit of trough. It is not something that is keeping me awake a lot at night at the moment,” he added.

Schroders also cautioned that if inflationary pressures persisted, or the recovery in economic growth disappointed, there could be increased market volatility which would impact its business.

“There is a tug of war going on. On the one hand we have fears of inflation and on the other hand we have fears of growth slowing. Three weeks ago the world was talking about more inflation and now the world is more worried about too little growth,” Harrison said.

“Somebody used the phrase goldilocks … arguably we are in that place where it is neither one nor the other, and that is not too bad for financial markets.”

Separately, Schroders announced that Elizabeth Corley would be joining as a non-executive director, and that she would succeed Michael Dobson as its chairperson at the end of the company’s shareholder meeting in April next year.

Corley, currently a director at Pearson (PSON.L), BAE Systems (BAES.L) and Morgan Stanley (MS.N), has previously headed Allianz Global Investors.

($1 = 0.7176 pounds)