MICHAEL DOBSON yesterday put in another pukka performance unravelling Schroders, the fund management business that was not so long ago a the basket case.
Indeed, it looks as if the patrician chief executive, who was lured to the company in October 2001 when Schroders helpfully agreed to buy out his hedge fund group, may well be worth his bumper pay packet.
Pre-tax profits were up 25 per cent to pounds 32.4m in the first six months, costs fell 17 per cent and, for the first time in four years, Schroders managed to attract more money into its plethora of funds than cash flowing away to rivals.
Mr Dobson is hopeful that having rolled up his sleeves and administered a fair amount of pain to one of the City’s best known investment houses, the story now be all about the gain.
Schroders has already boosted retail funds under management, which are more lucrative than institutional funds, and plans to increase this area further. It is also reducing its presence in bog- standard management and boosting specialist areas such as hedge funds and overseas funds, which also come with higher fees.
While hundreds of jobs have gone at Schroders – some through outsourcing, others with a bin bag in hand – the company isn’t afraid to pay big bucks to hire talent and it has been gradually building up some top teams again.
The company is not out of the woods. Mr Dobson warned that Schroders is likely to loose more mandates because, despite two- thirds of its funds beating their benchmark indices, over three or five years many still compare badly.
Additionally, many local authority pension funds are showing an irritating habit of sacking their old fund managers and putting their cash into a range of specialist funds with different managers. This presents a challenge as well as an opportunity for Schroders.
Schroders shares – yesterday up 8p at 725p – in the past few months have strongly reflected the glints of recovery in the equity markets. The shares, trading on a ratio of 40 times future earnings, appear to have taken full account of Mr Dobson’s ability to turn the company round. Hold.
