Schroders suffers as institutions withdraw funds

The fund management group Schroders suffered its biggest one-day share price fall in more than three years yesterday, as it revealed it had experienced a bigger-than-expected outflow of business during the first half of the year, and conceded its profit growth was now slowing.

In spite of reporting a 7 per cent rise in its interim pre-tax profits, to £132.5m, the company's shares ended the day down by 91 per cent at 872p.

Michael Dobson, the chief executive, said he believed the strong market reaction was down to the performance of the institutional business, which had net outflows of £4.6bn.

"[The level of institutional outflows] is disappointing," he said. "But it's not way out of line with what we've seen in the past."

Mr Dobson said the outflows had been mainly down to poor performance in its Japanese equity funds over the medium term, as well as a continued drift away from UK balanced mandate funds by institutional investors.

He said the company had since strengthened its Japanese equity funds, a move which is already making a difference to the performance of the portfolios. The group has also launched a new range of institutional products, which it hopes will be more attractive than its existing offering.

While overall group profits rose only 7 per cent, Mr Dobson said these numbers were distorted by a £20m one-off gain during the first half of last year. Excluding this, group profits were up 28 per cent, he said, boosted by net inflows of £2.3bn into its more lucrative retail business.

But the chief executive conceded that it would be impossible for the group to continue growing profits in excess of 20 per cent a year as it has in recent times. The group is still sitting on more than £500m in cash, and admitted it is continuing to look for acquisitions - mainly in the US.

Jonathan Asquith, the finance director, said the company was not going to yield to pressure to make a hasty acquisition or hand back the cash. "We do want to develop the company by acquisitions, but only by buying the right things," he said.