UK - Schroders has put net institutional outflows of £2bn in the first half of the year down to the restructuring of its business towards "higher margin products" and the move from balanced to specialist mandates.
Despite the outflows, which were down from £4.5bn in the first half of 2004, Schroders saw institutional funds under management climb from £69.1bn at year end 2004 to £71.7bn at the end of June, representing a gain of £2.6bn.
Announcing interim results for 2005, Schroders said total revenues in the asset management business increased 28% to £313.6m reflecting a “further improvement in gross margins as the business mix continues to evolve in favour of retail and higher margin business within institutional”.
Asset management profit before tax was up £44m over the year to date, from £55.3m to £99.8m but the result marked a profit slip for the six months to June 30, down from £119.8m at year-end 2004.
“We achieved strong investment performance across a wide range of equity and fixed income asset classes, with 64% of institutional assets outperforming their benchmarks,” Schroders stated in its half year report.
“Revenue and profit margins have continued to improve, benefiting from further changes in the business mix. A major upward shift in revenue margins has been achieved over the last three years, but we still see some further scope for improvement. We see good medium-term growth prospects for our retail business and encouraging signs in institutional.”
The firm posted a profit before tax for its total business of £123.5m as at June 30, up from £72.6m at the same time last year.
Schroders said the interim results had been calculated under IFRS with results for comparative periods restated from UK GAAP to IFRS, showing for the first time the results of the asset management and private banking arms separately. Gains or losses on seed capital investments previously included in the asset management segment are now included in group net income/(costs), together with all other income and expenses associated with the group’s investment capital.
The effect was a reduction of asset management revenues and increase in group net income by £6.8m.
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