Schroders Investor Day 2025: Private Markets Pivot and AUM Growth Drivers

Schroders is doubling down on private markets as a core driver of future growth, targeting £100bn in assets by 2027. This ambition builds on current assets of £73bn and relies on 13% annual growth in private equity, infrastructure, real estate, and debt management according to Schroders' investor presentation. The shift aims to deepen resilience through stable fee streams and thematic investments in high-growth sectors like energy transition and venture capital, though execution risks remain if market volatility disrupts dealmaking.

The strategy emphasizes infrastructure, lower-mid-market private equity, and inflation-linked real estate to counter macroeconomic threats like interest rate fluctuations and geopolitical uncertainty as outlined in Schroders' outlook. These areas are favored for their income stability and alignment with long-term structural trends, including decarbonization. However, Schroders faces intensified competition as global GPs leverage technology and acquisitions to capture market share according to McKinsey analysis, potentially pressuring returns.

While investor confidence in private equity remains robust, fundraising faces headwinds. Global dealmaking slowed in 2024 amid regulatory uncertainty, and venture capital/Asian markets underperformed. Schroders' technology upgrades and cost efficiencies may help maintain margins, but rising entry multiples and uneven capital deployment could constrain near-term profitability.

Risk and Guardrail Assessment

Schroders' growth strategy faces two critical guardrails: regulatory pressure on evergreen funds and geographic concentration risks from recent exits. The firm's exit from Brazil and Indonesia reflects strategic streamlining but creates immediate challenges replicating performance in these markets as reported by Investegate. Competitors aggressively target these regions, forcing Schroders to prove its European active ETF expansion can generate comparable returns. Regulatory scrutiny on evergreen structures presents another hurdle. While private markets saw strong investor confidence in 2024, LPs remain cautious about compliance costs and fundraising delays according to McKinsey. Schroders' pivot toward evergreen semi-liquid products now operates under heightened oversight, requiring more robust governance frameworks that could increase operating expenses. The firm's ability to maintain its £4.9 billion net inflow momentum hinges on navigating these regulatory frictions without stalling fundraising.

Schroders' strategy is underpinned by a complex ecosystem of investments and partnerships.

This visual representation captures the firm's commitment to building resilience through diversified and forward-looking investment strategies.

Growth Engine and Profitability Mechanics

Schroders' Schroders Capital unit drives growth through a private markets strategy generating steady, fee-based revenue. The division reported £427 million in revenue for fiscal 2024, though profitability remains modest at a 62 basis point margin according to investor presentation. This model prioritizes management fees alongside carry incentives, aiming to scale assets under management (AUM) from £73 billion to £100 billion by 2027. Cost efficiencies from technology upgrades and selective acquisitions underpin plans to expand margins long-term.

Structural trends favor Schroders Capital's focus areas. Infrastructure and private equity investments align with the energy transition and inflation-linked demand for resilient assets as detailed in Schroders' outlook. Higher interest rates also boosted capital deployment across private markets in 2024, supporting fund performance according to McKinsey analysis. However, competition is intensifying as asset managers leverage AI and alternative fund structures like evergreen vehicles. This rivalry pressures pricing and could limit margin gains from new business.

Execution risks remain. While inflation supports infrastructure returns, global fundraising slowed as limited partners became selective, despite higher allocation intentions. Idiosyncratic challenges include regional variations: venture capital and Asian markets lagged broader recovery trends. Thus, margin expansion depends on maintaining fee discipline while navigating crowded sectors and LP capital availability.

Valuation Implications and Catalysts

Schroders' growth targets could drive meaningful valuation upgrades if execution stays on track. The firm aims to expand Schroders Capital's assets to £100 billion by 2027 from £73 billion in October, targeting 13% annual growth in private markets. This growth engine generated £427 million in revenue last year with a 62bps margin, but management prioritizes long-term profitability through margin expansion. Recent momentum supports this: AUM rose 5% in Q3 to £816.7 billion, fueled by £4.9 billion in net inflows. If AUM milestones and margin improvement materialize, this could unlock valuation premium potential. However, margin expansion faces execution risks and market volatility that could delay upside.

Regulatory and competitive pressures present significant headwinds. Global private markets in 2024 faced uneven conditions, with intensified competition from firms using acquisitions and technology to expand. Regulatory uncertainties persist, particularly around fund structures and cross-border operations. Within Schroders, Q3 saw outflows in real estate and Asia Pacific equities amid strategic streamlining, revealing sensitivity to regional macro shocks. These factors could constrain growth and margins despite strong AUM targets.

Key monitoring requirements include asset growth rates across private markets and public assets, margin trajectory against FY24 benchmarks, and regulatory developments. Success hinges on navigating competitive dynamics while maintaining steady AUM growth. If Schroders executes its private markets focus amid persistent volatility, valuation upside remains compelling. Yet sustained macro shocks or regulatory changes could quickly erode this potential.