Share pick for 2020: Schroders
With assets under management of £444bn, Schroders (SDR) is one of the few UK financial firms able to stand shoulder-to-shoulder with its international peers.
While the UK accounts more than a third of assets under management, two thirds of operating revenue comes from outside the UK making it a truly diversified global business.
In terms of products, equities account for 37% of the total followed by multi-asset investments at 25% and fixed income at 18%.
Admittedly this means that Schroders has suffered net outflows from equities this year, along with the rest of the asset management industry, but these have been balanced by inflows into fixed income, multi-asset products and private assets.
Also the firm’s investment returns have been particularly strong this year, generating £35bn uplift in assets under management in the first half.
As well as its traditional asset management business, Schroders recently partnered with Lloyds (LLOY) to form a wealth management company after being awarded £80bn of the £109bn in pension assets that the bank pulled from its former partner Standard Life Aberdeen (SLA). It is also reaching out to younger investors with its MoneyLens service.
Success isn’t assured, however. Some observers have questioned how effectively Schroders Personal Wealth will be able to compete given that the bigger industry players have many more advisers and are unlikely to allow it to carve out a meaningful slice of the lucrative personal wealth management market.
Schroders Personal Wealth launched with 300 Lloyds advisers, while some of its bigger rivals have up to 10 times that number, although it plans to increase headcount substantially.
In a sign of confidence, earlier this year fund manager Nick Train doubled his holding in Schroders from 5% to 10% making him the second largest shareholder after the founding family.
The holding is a bet on Schroders cracking the US market, where it is ‘not well represented’ according to Train, through distribution deals. Of its assets under management, just 15% are owned by clients domiciled in the US compared with 41% owned by clients based in the UK.
‘Most of the trillion-dollar asset managers are in the US because of the scale of the domestic savings pool. How are they (Schroders) going to get to a trillion dollars? It has probably got something to do with the US,’ says Train.