City heavyweights warn of stock shocks ahead

Schroders warns tensions in Ukraine could halt the hot run for equities

Two veterans of the stock market reported record results today but both warned investors to stand by for shocks

Lord Rothschild, whose RIT Capital Partners looks after £2.1 billion of his family’s and other long-term investors’ money, said: “With the world recovery still fragile and reliant to a large extent on policy support, it is not hard to envisage markets having to deal with shocks in the coming year.”

Michael Dobson, chief executive of Schroders, which manages £263 billion for institutional and retail investors, said he expects equities to return between 6 per cent and 8 per cent this year after a stonking run last year.

"We don’t expect as strong an equity market as in 2013. There is still macro uncertainty around Ukraine, Syria, China and Japan and the continued [reining in] of quantitative easing. But equities remain our preferred asset class and there are even signs that emerging markets may have been sold off too much."

Schroders reported a 41 per cent profit rise to £508 million, reflecting its takeover of Cazenove Capital and a US fixed-income fund manager last year, as well as a big leap in performance fees. These hit £80 million, with 68 per cent of its funds outperforming their benchmarks or rivals.

Assets under management increased by just over £50 billion, with net inflows of £9.4 billion coming almost equally from institutions and intermediaries.

The dividend for the year has been hiked by 35 per cent to 58p a share, which was well above analysts’ forecasts. The shares jumped by 150p, or 6 per cent, to an all-time high of 2740p.

Shares in RIT Capital Partners also rose sharply, gaining 17p to 1305p. The investment fund’s net asset value rose 193p a share to 1384p last year and produced a return of 18.6 per cent.

Rothschild said: “As market conditions have become more volatile, I am increasingly satisfied with the progress which your company made ... Our 2013 performance combined appropriate levels of caution with a significant participation in stock market increases. We did not forsake our focus on long-term growth and for this our shareholders have rewarded us with their loyalty.”

He said that last year the fund had moved into US and Japanese equities, which turned out to be two of the strongest-performing markets. It also traded out and in of sterling successfully as the pound weakened then strengthened last year. The only poor area of performance was its exposure to gold and goldminers.