Opinion  

Schroders has everything to play for in the name game

John Kenchington

An authoritative fund sales report has underscored just how timely Schroders’ acquisition of Cazenove Capital was last year.

The Pridham Report on UK retail sales shows Cazenove’s net fund sales in the first half of 2013 came in at an astonishing £1.2bn. In this six-month period, before it was bought by Schroders on July 2, Cazenove’s sales were high enough to rank it sixth in the UK compared to other firms’ overall 2013 sales.

The figure was higher than the net retail sales of Schroders for the whole year, which were £980m, and also beat giants Henderson Global Investors, Axa Investment Managers and Royal London Asset Management.

Schroders suffered tough times in the wake of the March news its UK equity star Richard Buxton had quit. As report author Helen Pridham points out, Cazenove’s first-half sales were boosted by former clients of Mr Buxton switching into its UK Opportunities fund run by Julie Dean. So, in effect, Schroders became the recipient of many of its own outflows when it later bought Cazenove.

But still, fourth-quarter data in the Pridham Report shows that Schroders received net retail sales of £1.1bn in the period – meaning it must have actually lost money overall in the first three quarters.

So Schroders’ chief executive Michael Dobson is to be heartily congratulated for the Cazenove deal, which saved the group from a sobering 2013.

Barclays analysts upgraded Schroders to an ‘overweight’ rating in January, saying the Buxton outflows had subsided and the Cazenove funds were compensating nicely.

My only worry is that the magic of Cazenove for me was its ‘business cycle investing’ philosophy. It’s based on the premise that you can predict the companies that are going to perform strongly based on which point we are in the entirely predictable business cycle. It’s a very clearly articulated philosophy and its sheer simple logic allows it to be used across a diverse range of funds. Long-term performance figures prove it works.

Schroders has been very clear that it intends to preserve the ‘business cycle’ approach and its team, and this is very positive news. But I was hoping that when the group phased out the Cazenove brand it would do something bold to make the business cycle funds stand out – perhaps by renaming them as the ‘Schroder Cycle’ funds.

Schroders recently unveiled the funds’ future names and they seem to me to be relatively standard fayre – Cazenove UK Equity Income is becoming Schroder UK Alpha Income, for example.

If I were in Mr Dobson’s shoes, I’d be looking to send a clear message that I understand the business-cycle idea and its main proponents – Julie Dean, Matt Hudson and Paul Marriage – are truly distinctive.