Schroders Sees Investors Resurface After Fourth-Quarter Outflows

  • Middle East client pulls $1.4 billion from equity funds
  • CEO says firm not looking to do transformational M&A deal

Schroders Plc, Europe’s largest publicly-traded fund manager, said clients are starting to invest again this year after market uncertainty caused them to pull a net 2 billion pounds ($2.45 billion) out of equity funds in the final quarter of 2016.

Flows into the firm’s U.K. intermediary, U.S. and emerging-market debt businesses have all turned positive, according to Chief Executive Officer Peter Harrison. One institutional client in the Middle East pulled about 1.1 billion pounds from equities in the fourth quarter, he said without elaborating.

“The year has started well, but we are mindful of industry headwinds and that market returns remain difficult to predict,” Harrison said. “This is likely to weigh on client demand. Last year political issues, not least in the U.K., caused volatility.”

The asset-management industry has seen retail clients pull money from equity funds as Britain’s decision to leave the European Union and after Donald Trump’s presidential election victory hit confidence. Schroders reported 1.1 billion pounds of net inflows for the full year, compared with 13 billion pounds of net new money in 2015.

While competitors will look to do “big deals” in 2017, Schroders does not need something “transformational” because its adequately diversified already, according to the CEO. He also said the firm’s fixed-income and multi-asset business remain key for the firm in 2017 and it will continue to pursue a strategic objective of growing in North America.

Assets under management increased 27 percent for the year to a record 397.1 billion pounds, boosted by a depreciation in the pound and acquisitions, Schroders said in a statement on Thursday. The firm reported a 5 percent gain in full-year pretax profit to 618.1 million pounds, beating analyst estimates, and it raised its dividend 7 percent to 93 pence a share.

The shares were down 1.6 percent at 3,077 pence as of 10:01 a.m. in London, trimming the gain for the last 12 months to 13.3 percent and giving the company a market value of 8.3 billion pounds.

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