Schroders Plc (LSE:SDR) saw its shares decline more than 2% on Thursday after reporting third-quarter net new money of £2.2 billion—missing analyst forecasts as weaker wealth management inflows offset market and currency gains. Total assets under management (AUM) rose 5% quarter-on-quarter to £817 billion, buoyed by £39 billion in market and FX movements, including £8.4 billion from a stronger U.S. dollar.
“30-Sep AUM (£817bn) is up +5% q/q and +2% above VA cons. driven by market & FX movements of +£39bn (FX +£8.4bn driven by USD) and NNM of +£2.2bn,” Jefferies noted in a client report.
Asset management inflows were a bright spot, with net inflows of £4.4 billion, ahead of consensus expectations of £1.9 billion. “Strong inflows in Core Solutions (+£6.7bn), lighter NNM in Private Markets (£0.9bn vs VA cons £1.1bn) and positive NNM in FI (+£0.1bn) more than offsetting outflows in Equities (-£3.0bn, driven by Asia equities) and Multi-asset (-£0.3bn),” Jefferies said. The brokerage also noted that “the negative mix effect in public markets is likely to be offset by the strong market performance during the quarter.”
Wealth management was softer, with net inflows of £0.5 billion, missing expectations of £1.7 billion. Jefferies attributed the shortfall to “drawdowns in charity reserves in Cazenove despite continued flow momentum in HNW.” It added that “the outflow in Benchmark (-£0.2bn) was driven by the decision of an adviser firm to change its MPS provider.” Joint ventures saw £2.7 billion of outflows versus expectations of £0.1 billion in inflows.
By segment, asset management AUM stood at £574 billion (vs. consensus £561 billion), including £72 billion in private assets and alternatives and £502 billion in public markets. Wealth management AUM totaled £136 billion (vs. £134 billion consensus), split between £99 billion in advised and other wealth and £37 billion in Benchmark. Joint ventures accounted for £107 billion, slightly below the £109 billion expected.
Jefferies said Schroders faces “heavy lifting required in 4Q to meet WM target,” with stronger wealth management flows needed in the final quarter to hit full-year goals. The brokerage maintained a Hold rating on the stock with a 390 pence price target, around 3% above the prior close of 379 pence.
Schroders’ shares have traded between 429 pence and 283 pence over the past 12 months, with a market capitalization of approximately £6.1 billion ($8.2 billion) as of October 22. Jefferies’ valuation is based on “a target P/E of 10.0x 25E EPS before adding back surplus capital and deducting £250m of Tier 2 notes.” Key risks highlighted include weaker market returns, lower net new money, and an unfavorable business mix that could pressure fee margins.
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