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Investing.com -- Schroders Plc shares fell more than 2% on Thursday after the U.K. asset manager reported third-quarter net new money of £2.2 billion, below analyst expectations, as weaker wealth management inflows offset market and currency gains that lifted total assets under management 5% to £817 billion.
The firm’s assets under management were 2% above Visible Alpha consensus of £802 billion, supported by £39 billion in market and foreign exchange movements, including £8.4 billion from currency effects driven by the U.S. dollar.
“30-Sep AUM (£817bn) is up +5% q/q and +2% above VA cons. driven by market & FX movements of +£39bn (FX +£8.4bn driven by USD) and NNM of +£2.2bn,” Jefferies said in a note.
Asset management net inflows reached £4.4 billion, topping consensus forecasts of £1.9 billion.
“Strong inflows in Core Solutions (+£6.7bn), lighter NNM in Private Markets (£0.9n vs VA cons £1.1bn) and positive NNM in FI (+£0.1bn) more than offsetting outflows in Equities (-£3.0bn, driven by Asia equities) and Multi-asset (-£0.3bn),” the brokerage said.
Jefferies added that “the negative mix effect in public markets is likely to be offset by the strong market performance during the quarter”
Wealth management net inflows were lighter at £0.5 billion, missing consensus of £1.7 billion.
The brokerage attributed this to “drawdowns in charity reserves in Cazenove despite continued flow momentum in HNW.”
It added that “the outflow in Benchmark (-£0.2bn) was driven by the decision of an adviser firm to change its MPS provider.”
Joint ventures reported £2.7 billion of outflows, compared with expectations of £0.1 billion of inflows.
By segment, asset management assets stood at £574 billion, above consensus of £561 billion, including £72 billion in private assets and alternatives and £502 billion in public markets.
Wealth management assets totaled £136 billion, compared with consensus of £134 billion, comprising £99 billion in advised and other wealth and £37 billion in Benchmark. Joint ventures held £107 billion, slightly below consensus of £109 billion.
Jefferies said Schroders faces “heavy lifting required in 4Q to meet WM target,” noting that stronger fourth-quarter flows will be needed to achieve the firm’s full-year wealth management objectives.
The brokerage maintained a Hold rating on Schroders with a price target of 390 pence, about 3% above the prior close of 379 pence.
Schroders’ shares have traded between 429 pence and 283 pence over the past 12 months and carried a market capitalization of £6.1 billion ($8.2 billion) as of Oct. 22.
Jefferies said its valuation is based on “a target P/E of 10.0x 25E EPS before adding back surplus capital and deducting £250m of Tier 2 notes.”
The brokerage cited weaker-than-expected market returns, lower net new money, and an unfavorable business mix as key risks that could affect fee margins.