UPDATE 2-Schroders inflows boosted by U.S. as Europe bleeds

Thu Aug 2, 2012 7:27am EDT

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* H1 profit before tax 177.4 mln stg vs 215.7 mln stg y/y

* H1 net inflows 2.7 bln stg

* Assets under management 194.6 bln stg

By Anjuli Davies

LONDON, Aug 2 (Reuters) - British fund firm Schroders attracted more new money in the first half of the year than expected, buoyed by a strong performance in the United States which offset outflows in continental Europe plagued by euro zone uncertainty.

First half net inflows at 2.7 billion pounds ($4.21 billion) were well above forecasts of 1.3 billion pounds, as a predicted 300 million pounds of outflows in its retail business turned into 1 billion pounds of new money.

Schroders shares rose 3.56 percent by 1105 GMT to 1,338 pence, while the blue chip FTSE index was up 0.47 percent.

It was a tale of two continents. An inflow of 1.4 billion pounds from the United States counteracted a net 900 million pounds of outflows, two-thirds of which came from continental Europe and the remainder from Asia Pacific.

The asset manager also reported a 1.9 billion pound influx of client cash into its institutional asset management business, but warned that whilst it had a strong pipeline of new business, institutions were delaying decisions to award new mandates.

"This uncertainty will persist throughout the year," Michael Dobson, CEO of Schroders, told Reuters.

Concerns about how the euro zone's debt crisis will unfold have dampened investors' appetite for risk-taking and put pressure on fund managers' revenues.

"We are seeing huge volatility and no clear trends and I think that will continue," Dobson said.

Schroders said pretax profit for the six months to end-June was 177.4 million pounds, below consensus analyst forecasts of 184.6 million and down 17 percent from 215.7 million pounds in the first half of 2011.

The 200-year old asset manager is investing in the business, increasing headcount by 50 people in the first half of the year, mostly associated with its IT infrastructure upgrade programme.

In April, it also announced the acquisition of a 25 percent stake in India's Axis Asset Management Co, aiming to tap into growing business opportunities in Asia's third-largest economy.

"I think we're seeing, not surprisingly, a lot of opportunities... there may be more opportunities, like Axis, for bolt-on acquisitions," said Dobson.

Analysts at Peel Hunt, which cut Schroders price target to 1,415 pence from 1,540 pence with a hold rating, questioned the firm's performance.

"Fund performance does not look outstanding with only 66 percent of funds outperforming benchmark and it looks to me as if Aberdeen, F&C and Jupiter are producing stronger performance," analysts at Peel Hunt said in a note to clients.

On Wednesday, Jupiter Fund Management reported an acceleration of flows of money into its core mutual funds business during the second quarter of the year due to outperformance by the bulk of its funds.

UK fund firm F&C Asset Management reported a narrowing of net loss on the back of increased cost savings and a lower than expected fall in assets under management.

Last week, UK fund manager Aberdeen Asset Management reported a slowdown in client inflows.

Schroders said total funds under management at the firm stood at 194.6 billion pounds, compared with 199.6 billion pounds at the end of March.

The Group posted 10.1 million pounds of performance fees in the first half of the year, down from 13.8 million a year earlier.

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