Schroders’ new chief executive said “the business isn’t broken but it needs to do better” as he outlined plans to save hundreds of millions of pounds in costs as part a strategy aimed at restoring the fortunes of the FTSE 100 asset manager.
“This is an inflection point,” Richard Oldfield told the Financial Times in an interview. “We want to bring business back to profitable growth . . . a lot of it is around focusing our business, simplifying it and scaling our infrastructure.”
The strategy update came on Thursday as Schroders reported its full-year results for 2024, in which higher operating expenses, lower performance fees and reduced returns from joint ventures and associates weighed on profits.
Operating profit dropped 3 per cent to £641mn, Schroders said, although statutory pre-tax profits increased 14 per cent to £558mn. Overall assets under management increased 4 per cent to £779bn.
Oldfield, who spent three decades at professional services firm PwC, has streamlined the asset manager’s leadership since taking over Schroders’ top job in November. He replaced its 23-person group management committee with a group executive committee of nine members.
Oldfield is refocusing the business and slashing costs as he seeks to reduce its cost to income ratio from 75 per cent, which according to Jefferies is higher than its peers, to less than 70 per cent.
Schroders plans to deliver £150mn in annualised net cost savings by the end of 2027, part of a three-year “transformation exercise” to streamline and simplify the group.
The strategy is to be phased in because “the moment we destroy our growth platform or our client franchise we run the risk of destroying our business”, Oldfield added.
Shares in the company rose 5.3 per cent in early trading on Thursday.
Schroders is best known for its core public markets business — its largest division — which is in structural decline because of the rise of passive investing and a shift from public to private markets.
“We’ve not made the case for asset management as clearly as we need to,” said Oldfield, citing the risk for passive investors arising from stock market concentration in the Magnificent Seven tech companies.
“We shouldn’t sound the knell on mutual funds because it’s a highly profitable and highly cash-generative business,” he added.
He said the company plans to target market share with a focus on nine areas across equities, fixed income and multi-asset where Schroders believes it has a competitive advantage. Together they account for 85 per cent of revenue in the public markets business and the target is to stabilise these revenues by the end of 2027.
Oldfield’s predecessor Peter Harrison embarked on several acquisitions to target growth areas, which boosted assets under management but failed to lift pre-tax profit. Oldfield said Schroders was reviewing all of those acquisitions, adding: “some of them have not necessarily delivered the financial aspirations that we hoped for”.
At Schroders Capital, its £70.1bn private markets business, the company will invest in and scale up in specialist areas where it believes there is the potential for higher returns — namely private equity for small and medium-sized businesses, securitised credit, renewable energy infrastructure, and parts of real estate — while divesting from smaller, non-core areas.
The target is to generate cumulative net new business of £20bn in the next three years, and Schroders plans to use its balance sheet to co-invest with clients.
Oldfield said that in Schroders’ wealth management business, which includes the well-respected Cazenove brand, “we have a market-leading growth rate” and “we just need to keep doing what we’re doing”.
The board intends to hold the dividend at its current level of 15 pence a share as it brings the payout ratio back towards 50 per cent.