British fund firm Schroders said clients representing a better-than-expected 5.1 billion pounds of net new business have backed the firm to help them ride out stormy investment markets, according to Reuters. The blue chip asset manager, which roiled markets last quarter with results that undershot high expectations, reported a 15 percent rise in profits on Thursday. Its assets under management rose to a record 204.8 billion pounds ($336 billion)in the first half of a year blighted by equity sell-offs and doubts about the solvency of several euro zone states. Chief Executive Michael Dobson conceded that the faltering economic recovery and spiralling sovereign debt crisis had dented investor demand in its fiscal first half, knocking net inflows from retail clients to 400 million pounds from 5.1 billion pounds a year ago. But he was critical of those banks who were promoting a rush into low-risk, low-return cash products that helped prop up their own balance sheets, while underlying investment market fundamentals remained intact. "Very often this will be a private investor, particularly in continental Europe, encouraged by their bank to move out of a mutual fund into a bank deposit or bank-sponsored money market fund," Dobson told Reuters in a telephone interview. "We saw this very significantly in 2008, banks partially seeking to rebuild their funding base by generating deposits and I think we've seen a bit of this again this year," he said. In contrast, institutional investors continued to make longer-term commitments to markets and showed strong appetite for Schroders' Multi-Asset, equities and fixed income strategies, with positive net flows seen in all regions, especially in the UK and continental Europe, Dobson said. Analysts at Deutsche Bank had forecast lower net inflows from both institutional and retail clients and a 1 percent rise in assets under management to 204 billion pounds in the second quarter while peers at Credit Suisse were expecting a 3 percent dip to 195 billion pounds. "From a fundamental underlying point of view, I think markets offer reasonable value but they are completely overshadowed by these great macro-economic concerns that are washing around the world," said Dobson. "That will no doubt pass and ... when that happens I think we will be in a pretty good position because we have a broad product range and very competitive performance," he said, adding that 77 percent of Schroders' funds outperformed benchmarks over three years to end-June. FLIGHT TO SAFETY Shares in the 200-year-old company were up 0.8 percent at 1,586 pence by 1018 GMT, outperforming a 0.8 percent fall in the FTSE 100 as analysts cheered the robust results. Profits increased to 215.7 million pounds from 188.2 million pounds a year earlier, supporting an 18 percent increase in the interim dividend to 13 pence. Earnings per share also jumped to 60.7 pence against 49.4 pence in June 2010. A steep decline in new business wins in the group's private banking unit to 100 million pounds from 1.2 billion pounds last year took the shine off a 12 percent rise in asset management revenues to 534.6 million pounds. Schroders had warned investors not to expect a repeat of last year's "exceptionally high" new business wins in that unit, which were linked to a strengthening of its private banking team. Private banking assets under management rose 500 million pounds to 16.7 billion pounds over the quarter. "We believe Schroders has proven to be more resilient in H12011 than the market may have anticipated," analysts at Shore Capital said. "...we believe that due to the strength of both its brand and balance sheet, Schroders is the asset manager most likely to demonstrate resilience and possibly benefit from a 'flight to quality' on the part of investors," the note said. Data from fund research house EPFR Global showed a rush towards so-called safe havens gathered momentum in the last week of July, when investors moved more money into gold-focused commodities funds and German equities at the expense of money market products heavily weighted towards U.S. treasuries. While concerned at the numbers of investors switching into cash, Dobson said Schroders would concentrate on delivering outperformance for the clients that stuck with them rather than chasing capital that was halfway out of the door.
