Schroders shares dive after £2.3bn in withdrawals

A torrent of investor withdrawals from Schroders dealt a blow to Britain’s biggest fund management company days before its new boss takes charge.
Shares in the FTSE 100 group slumped to their lowest level in almost 12 years after it revealed that clients had pulled a net £2.3 billion in the third quarter and that four institutional customers had also warned the business that they planned big withdrawals totalling about £10 billion in the fourth.
The worse-than-expected outflows are an immediate setback for Richard Oldfield, who is the group’s finance chief and steps up to become its chief executive on Monday. It also mars the end of Peter Harrison’s eight-year tenure running the business.
Schroders can trace its roots to the beginning of the 19th century and has grown to become a giant in Britain’s asset management industry, overseeing more than £777 billion in assets for institutions such as pension funds and insurers as well as retail clients. However, like other traditional “active” managers that seek to produce bumper returns by picking investments, it is under pressure from cheaper, and increasingly popular, “passive” funds that simply track indices to replicate the performance of the wider market.
Harrison sought to counter these headwinds by diversifying the company into private market investing and wealth management, areas that are expanding quickly and have the potential to boost growth. Yet despite this strategy, profits at Schroders have shrunk under Harrison and analysts have warned that its costs are too high.
Oldfield signalled on Tuesday that he was preparing to tackle the cost base, saying that the company must “build greater commercial discipline and drive efficiencies”.
Even so, investors took fright at the scale of outflows facing the company. Withdrawals from a mandate with Scottish Widows, which is part of Lloyds Banking Group, account for about £8 billion of the outflows expected in the fourth quarter, while three other institutions plan to pull around £2 billion, it said.
The £2.3 billion of net outflows in the three months to the end of September also took shareholders by surprise and Schroders’ stock tumbled by 49¾p, or 13.7 per cent, to 313¾p. The fall knocked about £800 million from its market capitalisation to leave the business valued at £5.1 billion.
Oldfield joined Schroders in September last year after three decades at PwC, the accountancy and consulting giant, where he was a partner and held a string of senior roles. His elevation to the top job at Schroders was announced two months ago.
Rae Maile, an analyst at Panmure Liberum, a stockbroker, told clients that “there is clearly much which needs to be addressed” at the asset manager. He said the company was “over-costed” and had “failed to scale new business” but that “it will be good to have a CEO focused internally rather than externally”.
Despite the outflows, assets at Schroders rose over the course of the third quarter thanks to a £6 billion boost from market movements and its investment performance. As a result, its £777.4 billion of assets under management at September 30 represented a record. Oldfield said that Schroders had “a strong investment franchise, deep client relationships, exceptional talent and significant potential for profitable growth. I will do what is necessary to deliver on this potential”.