Schroders’ operating profit tumbled 14% to £723m for the 12 months to the end of 2022, a year chief executive Peter Harrison (pictured) described as a ‘stress test’ for the firm’s overall strategy.
Market-to-market movements and expenses arising from the group’s M&A spree over the 12 months, which included deals for Greencoat Capital and Cairn Real Estate, saw pre-tax profit fall 23%.
Currency and market movements were named as the main drivers behind a 4% AUM drop to end the year on £737.5bn. The £73.6bn they eroded could only partially be offset by the £52bn of AUM added through acquisitions.
Despite a strong first half, volatility in Q4 meant that net outflows for the year hit £7.6bn. In 2021, £37.3bn flowed into Schroders strategies.
The bulk of the outflows came from the asset management arm, which saw investors pull £7bn. This was partly offset by £5.4bn flowing into the firm’s wealth management division.
AUM for the solutions side of the business rose 2%, with the acquisition of River & Mercantile’s solutions arm adding £43.1bn to close out the year at £210.2bn.
Peter Harrison, group chief executive, said: “The market challenges of 2022 provided a stress test for our strategy. I am encouraged by our resilient performance and that our strategy is working. The businesses we have been building in recent years – across wealth management, private assets and solutions – performed strongly. They are all playing an increasingly important part in our growth and now represent 53% of the group’s AUM.
“Schroders Capital, our private assets business, had a record year with £17.5bn of fundraising, with particular strength in real estate and private equity. Despite the market dynamics, our wealth management advice businesses had a good year, delivering strong organic growth of 6.6%, while we also continued to build scale in Schroders Solutions.”
Seeking to expand
The firm said it is looking to grow Schroders Investment Management’s reach through geographic expansion into emerging markets and widening its thematic range.
Looking ahead, Harrison said: ““Our strength more broadly is underpinned by our approach to sustainability. We were early investors in ESG and the technology that underpins our capabilities in this area. This has proven to be the right decision and we will continue to invest in 2023 and beyond.
“2023 has started positively, particularly in Schroders Solutions. We are confident about our trajectory: our clients require broad, actively-managed solutions and we have built the capability to meet that need.”
The board has announced a total dividend of 21.5p per share for the year.