Schroders shares slide as fee pressure leads to profit miss
Adds CEO comments, context, updates shares
By Iain Withers
LONDON, Aug 1 (Reuters) -British fund manager Schroders SDR.L missed profit forecasts and flagged pressure on its margins in half-year results on Thursday, sending its shares sharply lower despite reporting record assets.
Schroders said clients have favoured lower-margin services, squeezing revenue and leading to an 8% fall in first-half profit to 315 million pounds ($403 million).
Analysts at JPMorgan said investors would likely react negatively to the company's "margin erosion", but welcomed a slight dip in costs.
Schroders shares fell by as much as 9% in early trading. They were last down 7% and were on track for their biggest one-day fall in more than two years.
The results highlight the challenges that will face Schroders' new CEO after long-standing boss Peter Harrison retires next year. His announced departure in April prompted a search to lead Britain's largest standalone fund manager.
Active asset managers such as Schroders have faced tough trading conditions in recent years due to choppy markets, inflationary pressure on costs and more clients opting for cheaper passive products.
The company reported net outflows of 3.9 billion pounds over the first half, though it achieved inflows when joint ventures were factored in.
Harrison told Reuters there were signs client risk appetite was growing and that flows into UK funds were starting to increase after a "grim" first few months of the year, echoing comments from rival Jupiter last week.
Harrison said outflows in the period had been exacerbated by 6.2 billion pounds withdrawn by Lloyds' LLOY.L Scottish Widows pensions business, which sold its bulk annuity business during the period.
Schroders reported 657.3 billion pounds in assets under management excluding joint ventures, up from 642.4 billion pounds six months earlier, and announced an unchanged interim dividend of 6.5 pence per share.
The company has been targeting expansion in private markets and on Wednesday announced it would launch a joint venture with British insurer Phoenix PHNX.L to channel up to 20 billion pounds into unlisted assets over the next decade.
($1 = 0.7808 pounds)
Reporting by Iain Withers
Editing by Sinead Cruise, David Goodman and Barbara Lewis
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