Schroders’ LDI business lost £20bn in assets after ‘mini’ Budget
Schroders lost £20.2bn in assets from its liability-driven investing business in the week after the “mini” Budget, an early sign of the impact wrought on asset managers by volatility in the UK government bonds market.
The FTSE 100 asset manager said in a trading update on Thursday that assets at Schroders Solutions, which builds LDI strategies for pension fund clients, dropped from £225.7bn at June 30 to £205.5bn at September 30.
This period includes the week following former chancellor Kwasi Kwarteng’s September 23 announcement of a £45bn package of unfunded tax cuts, which sent UK gilt prices tumbling and yields soaring on the prospect of higher borrowing.
Schroders expanded its LDI business this year with the acquisition of River and Mercantile Group’s UK solutions division. Alongside Insight Investment, BlackRock and Legal and General Investment Management, Schroders is one of a handful of dominant players in the LDI market. These strategies use derivatives to help UK defined benefit pension schemes match their assets with liabilities.
Since his appointment, Beesley has said he will set out plans to cut costs and to rationalise underperforming funds in a bid to stem outflows.
“The [third-quarter] numbers and outlook were slightly better than we expected, but clearly significant improvement is still needed. We think the new capital policy will divide opinion. We see it as sensible and more sustainable, [but] it may result in lower returns than some may have expected . . . for in the short term,” said David McCann at Numis.
Jupiter shares rose 2.25 per cent in early trading, providing a small boost to a decline so far this year of about two-thirds.
This story originally appeared on: Financial Times - Author:Harriet Agnew
