Schroders first-half profit dips as coronavirus triggers rising mutual funds outflows

By Pamela Barbaglia

LONDON (Reuters) - British money manager Schroders <SDR.L> on Thursday posted a 10% fall in profit before tax and exceptional items in the first half of the year amid rising outflows in mutual funds and a contraction in revenue margins.

Britain's largest-listed fund manager by market capitalisation reported 306.2 million pounds ($396.77 million) in profit before tax and exceptional items for the first half of 2020, down from 340.4 million pounds in the same period last year.

Net operating revenue was down 2% to 971.6 million pounds and net income slipped 3% to just over 1 billion pounds.

Assets under management rose instead by 5% to a record high of 525.8 billion pounds, ahead of a company-compiled analyst consensus of 519.4 billion pounds.

Schroders boss Peter Harrison said the company's diversified business model helped generate 38.1 billion pounds of positive net new business and that the firm had a strong capital position.

"We saw client demand for solutions strategies as well as momentum across wealth management," he said.

But its mutual funds business was under pressure, with assets under management down to 94.1 billion pounds and nearly 5 billion pounds of net outflows in the unit, up from 1.8 billion last year.

Schroders, which is a big investor in British companies, is trying to navigate the economic fallout of the COVID-19 pandemic which is making it harder for money managers to continue turning savings into investments as most retail investors are wary of taking on risk.

Jefferies analysts said the company's ability to control costs and a rise in assets under management have not made up for margin compression which is putting a strain on the balance sheet.

British rival Jupiter Fund Management Plc <JUP.L> posted an 8% fall in assets under management in the first half of the year, with total assets sliding to 39.2 billion pounds from 42.8 billion pounds at the end of December.

(Reporting By Pamela Barbaglia, Editing by Timothy Heritage)