Outperforming funds to boost Schroders Q3

Schroders will report its third-quarter trading update on 5 November, and the fund manager is performing well. 

City of London
Source: Bloomberg

The fund manager posted a 15.8% jump in first-half profits and assets under management rose by 14% during the same period. The company has a wide range of funds which invest in equities, fixed income, commodities and property. More than 75% of the firm’s funds are outperforming their benchmarks when you look at it on a three-year basis, but the market volatility since the first-half numbers were announced could lead to a slightly weaker-than-anticipated second-half.

Schroders stated that funds specialising in Asia Pacific and fixed income saw the most inflows in the earlier part of the year, but as China’s growth rate is declining and the Federal Reserve is creeping towards an interest rate rise those funds might not be as popular as they once were. The fund manager is keeping an eye on global events and it would prefer less volatility to more, but at least it is well diversified across asset classes and regions, which will help it stay ahead of its competitors.

Schroders will reveal its full-year results in March 2016, and dealers are expecting revenue of £1.62 billion and adjusted net income of £480 million – that represents a 5.8% jump in revenue and a 6.1% rise in adjusted net income. The fund manager will also announce its second-half numbers on the same date, and traders are expecting revenue of £807 million compared with first-half revenue of £806 million.

Equity analysts are very bullish on Schroders, and out of the 17 ratings, seven are buys and ten are holds. The average target price is £31.84, which is 6.75% above the current price. Investment banks are less bullish on Ashmore, and out of the 16 recommendations, four are buys, eight are holds, and four are sells. The average target price is 272p, which is marginally below the current price.

Even though the stock has declined since May, the long-term outlook for Schroders is bullish as the stock has been in an uptrend since 2003, and £34.38 is the target. £30 will be a stumbling block to further gains, and support will be found at the £29.30 area and then again at £27. 

Schroders chart

Schroders chart
Source: Bloomberg

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts