Schroders prevails by keeping faith in active AM

Schroders prevails by keeping faith in active AM

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At over 200 years old, Schroders has a long and respected track record as a dedicated asset manager. The firm has grown since its founding in 1804 to manage £324.9bn across a range of active strategies covering equities, fixed income, multi-asset, alternatives, and real estate. 

Active managers are, of course, facing increasing competition from passive funds and smart beta offerings offering lower fees; volumes are shifting away from funds aiming to outperform a benchmark and towards products designed to meet a specific outcome.

 Schroders, however, has managed to buck the trend toward by catering to this new need with active strategies. It has seen success by providing outcome-oriented solutions across all asset classes, particularly in multi-asset. 

According to the firm, “Rather than follow benchmarks, we are in a position to meet the needs of our clients by developing new products and investment solutions that take into account shifts in economies, geopolitical situations, sector trends and client demand,” mitigating the outflows seen by many competitors over the last few years. 

In order to continue growing the business, the firm has been investing “in diversifying our business by increasing scale in our multi-asset and fixed income capabilities.” With multi-asset accounting for a quarter of the group’s assets under management (AuM) at £78bn, net flows have remained positive at £6.1bn in 2015 and have increased by more than £44bn since 2010. 

Fixed income has also continued to grow apace, with £9.1bn in new business bringing AuM to £60bn. The firm identifies one of its key strengths as its strong financial position and ability to invest seed capital in new strategies, £229m of which was deployed across new strategies globally in 2015. 

Recent UK pension reforms have also provided new revenue streams for asset managers. “The opportunity for asset managers is in working with scheme providers, platforms and consultants to provide appropriate solutions,” according to Schroders. 

“The UK market has seen a charge cap imposed on defined contribution (DC) workplace schemes of 75bps, so the challenge for asset managers is to develop innovative, outcome-focused, competitively-priced solutions in an increasingly fee sensitive channel.” 

In addition, with the responsibility for saving shifting to the individual, and DC saving levels proving inadequate, there has also been growth in the complementary savings market with clients looking to invest directly in products provided by the asset manager. 

Schroders views the pre and post-retirement space, alongside increasing competition from passive providers, as the main influence on the future form of the asset management industry. However, “adoption of new technology could have a significant impact on the industry, having already changed how we interact with clients and construct portfolios.” 

During 2015 the firm rolled out a new web platform for client use that has been optimised for smart phones and tablets, providing personalised content to investors. In addition to client experience technology, there is ample room for growth in internal product development. 

This year, Schroders established its Market Intelligence team, consisting of “individuals experienced in data science, investment and product development”. Analysing global trends and changes in investor demand, they are mandated with ensuring new solutions are developed to meet clients’ evolving investment preferences organically. 

However, a real opportunity for innovation lies in unstructured data, according to Schroders. “We also looked for innovative ways to analyse new and unstructured data points,” says the firm. 

“There are huge pools of data being produced every second of every day and the real winners in active management will be those that can structure and use that data to generate alpha, which complements our fundamental research.”

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