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Withdrawals take toll on Schroders profits; INVESTMENT.

First-half pre-tax profit at Schroders fell by 27 per cent, hurt by writedowns and client outflows, and the fund firm yesterday warned that demand from retail investors would weaken.

The company, which announced the mark-to-market writedowns in April, said assets under management fell to pounds 130.2 billion from pounds 139.1 billion at the end of last year.

"We expect retail investor demand for mutual funds to be increasingly affected by the volatility of financial markets. This will have a negative impact on revenues in our retail business," the firm said.

Pre-tax profit came in at pounds 135.7 million, down from pounds 185.6 million a year ago.

The firm, which traces its roots back more than 200 years, saw a total of pounds 1.1 billion of net outflows, largely in its institutional business, while retail funds saw pounds 200 million of outflows.

In April Schroders said it had taken an unrealised mark-to-market writedown of pounds 25.8 million on US mortgage and asset-backed securities in the first quarter.

It also announced a pounds 7.7 million writedown on seed capital invested in new funds at the time.

Profit from private equity dropped to pounds 7.4 million from pounds 36.2 million a year ago due to unfavourable market conditions, the company said.

However, profit from the firm's asset management business rose to pounds 136.7 million from pounds 123.2 million, helped by a rise in gross profit margin to 65 basis points from 57 basis points as it sold more higher margin products.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Aug 9, 2008
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