Brexit Turmoil Spurs Outflows at U.K. Asset Managers

  • Schroders sees outflows while assets hit record from pound
  • Henderson CEO expects Brexit impact to last ‘a quarter or two’

U.K. asset managers Schroders Plc and Henderson Group Plc reported net outflows totalling 3.4 billion pounds ($4.5 billion) after Britain’s vote about European Union membership spooked investors.

Schroders, Europe’s largest publicly-traded money manager, reported 2 billion pounds of net outflows in the second quarter, according to a statement on Thursday. Henderson had outflows of about 1.4 billion pounds. Both firms reported higher assets under management, boosted by a weaker pound.

“There was heightened market volatility throughout the period, particularly towards the end of June following the result of the referendum,” Schroders Chief Executive Officer Peter Harrison said in the statement. “We expect the current market environment to persist and this may have an impact on investor demand.”

British asset managers fell after the U.K.’s shock decision to leave the EU raised concern that investor uncertainty could lead to a surge in redemptions across the industry. Schroders shares are down about 4 percent since the June 23 vote, while Henderson is 13 percent lower.

Schroders reported 700 million pounds of net inflows in the first six months. Assets under management climbed to a record of 343.8 billion pounds, with the pound’s depreciation adding 28.5 billion pounds. The CEO said outflows in the second quarter were mainly from independent financial advisers and he had not seen any “deterioration” since the referendum.

‘Element of Choppiness’

“We have seen positive days and negative days,” Harrison said by phone. “There is an element of choppiness, but it’s got a better feel about it. We’ve seen inflows in a whole range of assets,” including emerging markets.

Henderson, which was forced to suspend its U.K. property fund in the aftermath of Brexit, saw its assets increase to 95 billion pounds at June 30, helped by a 5.1 billion pound gain from the weaker pound. CEO Andrew Formica said 90 percent of the outflows in the second quarter were in June, which had set the firm back to levels seen in the third quarter of 2015.

“We are seeing a stabilization in the market and a moderation of the outflows,” Formica said by phone. “People were quite cashed up going into the results and investments were deferred. The shock of Brexit will be concentrated to only a quarter or two.”

While Schroders and Henderson said there will be little operational impact on either firm, Formica said short-term growth will be driven from outside Europe. He also said that the asset manager might have to eventually move a “handful of people” to Luxembourg, where Henderson’s European fund range is domiciled.

U.K. wealth manager St James’s Place Plc and Jupiter Fund Management Plc yesterday shrugged off the impact of Brexit after reporting net inflows in the first half. Both investment firms said the positive flows had continued since the end of June.

Schroders was down 1.7 percent to 2,596 pence as of 11:10 a.m. in London trading on Thursday, while Henderson was up 3.8 percent to 231.3 pence.

Sign up to receive the Brexit Bulletin, a daily briefing on the biggest news related to Britain's departure from the EU.

(Corrects to show FX impact on Schroders’ assets was 28.5 billion pounds.)
Before it's here, it's on the Bloomberg Terminal. LEARN MORE