Company Reports

Schroders has secured shareholder approval for Nuveen's GBX 590 per share bid, and only standard regulatory and antitrust approvals remain. Completion is expected in the fourth quarter of 2026.

Schroders' near-three-century run as an independent, family-influenced asset manager is drawing to a close. On Feb. 12, 2026, Nuveen—the asset managment arm of US pension provider TIAA—made a cash offer for the entire share capital of Schroders.

Margin pressure sums up the challenge and investment case for Schroders. Like most of its UK peers, Schroders has seen a material decline in its management fee margin. To halt this decline, Schroders has laid out a strategy that hits all the right notes. It aims to focus its resources on higher-margin asset classes, increasing ownership of client relationships, and investing heavily in technology to compete in a digital world. Schroders is executing well on this strategy and early signs are that the decline in margins is at least slowing down. Schroders has made some judicious acquisitions that support its strategy

Nuveen’s all-cash bid of GBP 5.90 per share for Schroders has been making headlines and overshadowed the firm’s strong second-half results, where adjusted operating profit surged 43%, and efficiency gains pushed its cost/income ratio below guidance.

Margin pressure sums up the challenge and investment case for Schroders. Like most of its UK peers, Schroders has seen a material decline in its management fee margin. To halt this decline, Schroders has laid out a strategy that hits all the right notes. It aims to focus its resources on higher-margin asset classes, increasing ownership of client relationships, and investing heavily in technology to compete in a digital world. Schroders is executing well on this strategy and early signs are that the decline in margins is at least slowing down. Schroders has made some judicious acquisitions that support its strategy

Morningstar Direct's fund flow estimates suggest that Schroders enjoyed a strong third quarter with assets under management increasing by nearly 6% compared with June 30, 2024. Net inflows came in at a healthy 1.6% of starting AUM.

Margin pressure sums up the challenge and investment case for Schroders. Like most of its U.K. peers, Schroders has seen a material decline in its management fee margin. To halt this decline, Schroders has laid out a strategy that hits all the right notes. It aims to focus its resources on higher-margin asset classes, increasing ownership of client relationships, and investing heavily in technology to compete in a digital world. Schroders is executing well on this strategy and early signs are that the decline in margins is at least slowing down. Schroders has made some judicious acquisitions that support its strategy

We do not believe that the sharp decline in Schroders' share price on the day of the group's third-quarter trading update is entirely justified. The outflows were not unexpected; we think they come from low-fee-margin mandates with limited impact on revenue. While traditional asset management in the UK is far from a growth industry, Schroders trades 55% below its 2021 highs while booking broadly stable earnings over this period. We do not believe fundamentals have deteriorated to such an extent to justify this sharp derating. We maintain our GBX 420 fair value estimate.

We have updated our model to incorporate Schroders' recent first half of 2024 results. We now take a more bearish view of Schroders' short-term prospects. Fee margins and client flows will likely be weaker than we previously forecast. We cut our fair value estimate to GBP 4.20 per share from GBP 5.00 per share previously. However, we believe that Schroders has positioned itself well to benefit from longer-term trends. Apart from briefly during the pandemic, the shares have not traded at these levels in over a decade. We do not believe that its longer-term fundamentals have deteriorated to such an extent to justify a nearly 50% decline from its 2021 highs.

Margin pressure sums up the challenge and investment case for Schroders. Like most of its U.K. peers, Schroders has seen a material decline in its management fee margin. To halt this decline, Schroders has laid out a strategy that hits all the right notes. It aims to focus its resources on higher-margin asset classes, increasing ownership of client relationships, and investing heavily in technology to compete in a digital world. Schroders is executing well on this strategy and early signs are that the decline in margins is at least slowing down. Schroders has made some judicious acquisitions that support its strategy

Narrow-moat Schroders reported a disappointing 1% increase in assets under management for the first quarter of 2024 compared with end-2023. If we exclude the growth from Schroders’ wealth management operations, the core asset management business’ AUM would be flat. Considering that most asset class valuations increased in the quarter, this would suggest that Schroders suffered net client outflows in its asset management business. Our current estimate of client net inflows of 4% of starting AUM looks optimistic, but Schroders still has nine months to make up lost ground. At this stage, we are not changing our earnings estimates or our GBX 500/share fair value estimate for Schroders. It does not report earnings every quarter. For the first quarter, it only discloses AUM. The subsequent full earnings disclosure will be in its interim results in August.

We increase our fair value estimate for narrow-moat Schroders to GBX 500 per share from GBX 470 per share to reflect resilience in assets under management, or AUM, inflows compared with peers in challenging market conditions. Schroders focuses its strategy on alternative asset management products that allow it to slow down shrinking margins and keep them relatively high although gradually declining. We believe that restructuring charges incurred in 2023 will also allow for further cost discipline that is crucial for Schroders' profitability in a shrinking margins environment.

Margin pressure sums up the challenge and investment case for Schroders. Like most of its U.K. peers, Schroders has seen a material decline in its management fee margin. To halt this decline, Schroders has laid out a strategy that hits all the right notes. It aims to focus its resources on higher-margin asset classes, increasing ownership of client relationships, and investing heavily in technology to compete in a digital world. Schroders is executing well on this strategy and early signs are that the decline in margins is at least slowing down. Schroders has made some judicious acquisitions that support its strategy

Narrow-moat Schroders increased its fee-generating assets under management, or AUM, by 4% year on year to GBP 751 billion by the end of 2023 supported by reasonable net new inflows of GBP 10 billion. Considering the challenging market conditions, this is an acceptable outcome. Flows remained the strongest in Schroders’ targeted growth areas of wealth management and private equity/alternatives. Schroders enjoyed another strong year in its private equity operation with inflows of around GBP 5 billion in 2023, equal to 7% of the segment starting AUM. The traditional active equity and fixed-income portfolios continue to suffer from net client withdrawals. Schroders managed to maintain its fee margins in the asset management business at 35 basis points, defying industry pressure. Executing its strategy of focusing on higher-margin assets, Schroders redeemed low-margin institutional mandates within its asset management business, which offset margin contraction in other areas. Wealth management margins improved in 2023 compared with 2022, reaching 41 basis points as this business segment is less dependent on market values.

Margin pressure sums up the challenge and investment case for Schroders. Like most of its U.K. peers, Schroders has seen a material decline in its management fee margin. To halt this decline, Schroders has laid out a strategy that hits all the right notes. It will focus its resources on higher-margin asset classes, increasing ownership of client relationships, and investing heavily in technology to compete in a digital world. Schroders is executing well on this strategy and early signs are that the decline in margins is at least slowing down. Schroders has made some judicious acquisitions that support its strategy

We are dropping coverage of some of our European banks and asset managers. We will no longer be reporting on Santander, Credit Agricole, Julius Baer, Unicredit, Intesa Sanpaolo, Mediobanca, Amundi, KBC, DWS Group, BBVA, and Schroders. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Narrow-moat Schroders recently reported excellent results for its 2021 fiscal year, with a 25% year-on-year increase in net income. We have updated our model, and we now expect flat earnings growth for 2022. While acquisitions will provide a tailwind to assets under management, Schroders guided for lower performance fees and elevated non-compensation costs for 2022. The decline in management fee margins has started to slow down, and we anticipate this to continue. Mainly due to some technical changes in our model, we reduce our fair value estimate slightly to GBX 4,000 per share from GBX 4,100 previously. Schroders is currently trading at 0.8 times our fair value estimate, and at 15 times 2022 earnings it is trading at a discount to the 18 times earnings it has traded at over the past 10 years.

Margin pressure: two words that sum up the challenge and the investment case for Schroders. Like most of its U.K. peers, Schroders has seen a material decline in its management fee margin. To halt this decline, Schroders has laid out a strategy that hits all the right notes. It will focus its resources on higher-margin asset classes, increasing ownership of client relationships, and on investing heavily in technology to compete in a digital world. Schroders is executing well on this strategy and early signs are that the decline in margins are at least slowing down. Schroders has made some judicious acquisitions that support its strategy

Narrow-moat Schroders reported aftertax profits of GBP 305 million for the first half of 2021, 37% higher than the GBP 223 million it reported a year earlier for the same period. Reported revenue was slightly higher than what the company-compiled sell-side consensus expected, while cost growth came in marginally lower than expected. We are likely to increase our fair value estimate of GBX 4,100 per share on the back of these results and maintain our narrow economic moat rating.

Narrow-moat Schroders reported net attributable profits of GBP 486 million for its 2020 fiscal year, this is slightly lower than the GBP 496 million it reported a year earlier, but also 3% ahead of the GBP 472 million we anticipated. We do not expect to make wholesale changes to our model and we maintain our GBX 4,100/share fair value estimate and our narrow moat rating. Schroders remains in 3-star territory but its share price has pulled back slightly recently and at 0.85 times our fair value estimate it is not far from moving into 4-star territory. Schroders declared a GBX 114/share dividend for 2020; this translates into a 3.3% yield at Schroders' current valuation, which should be attractive for dividend-focused investors.