Yahoo Finance FTSE 100: Schroders sees assets shrink to £752.4bn
Schroders (SDR.L) reported a drop in assets under management, with the UK fund manager saying that assets dropped to £752.4bn ($843.9bn) from £773.4bn in the three months through September.
The UK’s largest standalone asset manager saw more than £20bn exit its Solutions business arm, which houses the firm’s liability-driven investment (LDI) strategies.
LDI funds came under pressure since prices of UK bonds tumbled from the end of September.
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Defined benefit pensions have to make sure that their assets, such as stocks and bonds, can generate enough cash to meet liabilities – the monthly payouts guaranteed to pensioners.
LDI is a product sold by asset managers to pension funds, using derivatives – contracts that derive their value from one or more assets – to help them match assets and liabilities so there is no risk of shortfall in money to pay pensioners.
It was a popular product until the mini-budget prompted a mass sell-off of gilts, leading yields to soar at an unprecedented rate.
The turmoil led to margin calls on thousands of pension plans holding LDI contracts, which in turn rushed to sell gilts to raise cash to meet these calls.
The Bank of England was forced to intervene on September 28 with a £65bn emergency bond-buying programme.
Within the third-quarter AUM, Schroders assets under management dropped to £518.6m from £541.5m at the end of the second quarter, while wealth management was the same at £96m.
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Schroders provided no further detail or commentary on its third-quarter update.
The asset management industry is witnessing a fall in assets under management as concerns around recession, higher interest rates and inflation prompt investors to play it safe and exit riskier assets.
