Fitch Affirms Schroders' Asset Manager Rating at 'Highest Standards'
OREANDA-NEWS. Fitch Ratings has affirmed Schroder Investment Management's (Schroders) Asset Manager Rating at 'Highest Standards'. The Outlook is Stable.
KEY RATING DRIVERS
The affirmation reflects Schroders' diversified business, expanding global product range and client base. It takes into account the asset manager's demonstrated ability to adapt to industry changes, focus on superior investment services and operational efficiency. Schroders' ability to maintain a strong financial profile allows re-investment in future business growth and enhancements of operational capabilities, using technology as a competitive edge.
Fitch also notes the quality, depth and breadth of Schroders staff, with robust succession planning of key individuals allowing a smooth transition. Finally, a solid risk management framework and disciplined, research-driven investment processes across asset classes support a "Highest Standards" rating.
Schroders' 'Highest Standards' rating is based on the following category scores:
Company: Highest (unchanged)
Controls: Highest (unchanged)
Investments: Highest (unchanged)
Operations: Highest (unchanged)
Technology: Highest (unchanged)
Asset manager operations in the 'Highest Standards' category demonstrate an investment platform and operational framework that Fitch considers superior relative to the standard applied by international institutional investors.
The company has a global, diversified, long established and expanding franchise. The strategic evolution of the business has come mainly through organic growth but more recently, through targeted acquisitions in key regions (eg the US) and asset classes (eg fixed income). Schroders has demonstrated its ability to adapt to industry changes. As a well-managed company, Schroders increases operational efficiency to reduce costs, while using its financial strength to reinvest in future growth.
The recent board and senior management changes, most importantly, the promotion of Peter Harrison to Chief Executive Officer (CEO) in April 2016, followed a well-prepared succession planning process, which Fitch believes contributes to the organisation's stability and continuity.
Schroders has an effective, highly structured, risk and governance framework that is well embedded in the business but also benefits from the independent oversight of influential risk functions and committees. Mechanisms to address risk challenges and escalation are formalised and operate effectively, in Fitch's view.
The active, mainly fundamental research-driven investment process is implemented by accountable, focused staff using asset class-specific analytics in a disciplined manner. The process has proven overall stable, with notable refinements as markets and technology evolve. As the business grows in size and complexity, Schroders has managed to keep a simple and efficient organisation of investment teams and processes. Fitch also recognises that Schroders, whose success is largely driven by investment performance, will continuously be challenged to retain talented investment professionals.
Investment operations are scalable, robust and flexible, as demonstrated by an ability to integrate newly acquired businesses, increased volumes and new technologies (digitalisation) over the past two years. Reliance on some third-party service providers is monitored through strict oversight and control procedures.
Schroders' IT platform is built around global third-party vendor systems and asset class-specific proprietary applications. A major, transformational project aimed at replacing Schroders' core "Front to Back" system was initiated in 1Q16, demonstrating the organisation's ability and willingness to stay ahead of the technology cycle.
Schroders is a global asset management company and the core subsidiary of Schroders Plc (A+/Stable/F1). At end-December 2015, Schroders managed GBP281.9bn (GBP313.5bn, including wealth management), 58% for institutional clients, 32% for intermediaries. Schroders' Asset Manager Rating refers to the investment activities based in the global investment hub, London (excluding alternatives and real estate business).
The rating may be sensitive to material adverse changes to any of the aforementioned rating drivers, notably through weakened financial conditions, heightened staff turnover or deterioration of processes and policies. A material deviation from Fitch's guidelines for any key rating driver could cause the rating to be downgraded.