Christopher Johnson: Welcome to Dividend Watch, my name is Christopher Johnson.
The UK’s largest asset manager, Schroders, is still on the hunt for a successor for its top job.
In April, the blue-chip firm confirmed that longtime CEO, Peter Harrison, would be stepping down after eight years at the helm of the business.
Traditional asset management firms are in secular decline due to the rise of cheaper passive investing and a shift in investor demand from public to private markets.
British firms like Schroders must also contend with the multi-decade shift by UK pensions funds away from holding UK domestic stocks, which has deprived UK equity fund managers of capital.
Harrison has tried to offset this decline by expanding into private markets, wealth management, whilst bolstering outsourcing its chief investment officers and liability-driven investments to UK pension houses.
Schroders recent first half of 2024 results showed that fee margins and client flows will likely be weaker than previously forecast, which led to Morningstar decreasing Schroders’ Fair Value Estimate.
The London-based investment house is currently trading at £3.47, underperforming Morningstar’s Fair Value Estimate of £4.20.
Backers of Schroders argue the firm remains a highly cash-generative business, which attracts net new inflows ahead of the industry average.
However, bears on the stock point to the declining fee margins Schroders and many other active asset managers have seen, while arguing the firm may struggle in the long term because it does not have the scale to compete against global giants nor the nimbleness of a boutique investment house.
Schroders pays a quarterly dividend of over 5.37p to investors.
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