London: British blue-chip investment manager Schroders suffered an unexpected loss on its investments in the first quarter.
Overall pretax profit grew 11%, but after the results Schroders shares were trading 5.7% lower at 1,765 pence by 0747 GMT on Thursday, lagging only loss-making Lloyds Banking Group at the top of a list of the FTSE 100’s biggest fallers.
Schroders said on Thursday pretax profit for the three months to the end of March was 104 million pounds, compared with a forecast of 117 million from Numis.
While the core businesses of asset management and private banking posted higher profits than last year, the group segment which comprises returns on the company’s investments, saw a loss of 0.2 million pounds during the period.
Chief executive Michael Dobson said after the trading statement was released that the drop in returns in the group segment reflects gains from private equity investments that featured in last year’s numbers.
“We had some private equity gains in the first quarter of last year which we didn’t have in the first quarter of this year. These are unpredictable and can be lumpy... the important thing is the underlying earnings in the core business of asset management and private banking,” he said.
Asset management pre tax profits were 9% higher than the same period in 2010 while private banking profit multiplied to 6.7 million pounds from 1.3 million pounds.
“The Q1 (statement) was disappointing with most of the key numbers weaker than we had expected, although the majority of the profit before tax miss is due to non-operational reasons and we therefore believe the investment case remains intact,” Numis analysts said in a note.
Schroders said that market volatility since the start of 2011 had impacted demand from retail investors and flows of funds via intermediaries have slowed.
Dobson said retail investors remain jumpy into the second quarter amid volatile markets and continued economic and geopolitical uncertainty around the world.
“April hasn’t been great for the industry,” he said.
Net inflows during the three months to the end of March, at 3.1 billion pounds, were in line with forecasts and mostly to its asset management business.
Private banking contributed 100 million pounds of inflows, Schroders said.
“Schroders has made a strong start to the year in a volatile quarter,” said Royal Bank of Scotland analysts in a note to clients, citing fund flows in line with forecasts robust management fee revenue growth in asset management.
Total funds under management at the firm stood at 201.4 billion pounds, Schroders said, compared with 196.7 billion pounds at the end of 2010.