Strategy

Our objectives are aligned with those of our clients – to help them achieve their financial goals and build future prosperity.

Delivering consistent investment outperformance

Building partnerships with our clients and designing purposeful products

Ensuring operational efficiency

Developing and retaining a deep pool of talent

Maintaining a strong capital base to invest in future growth opportunities

Measurable by:

Targeting at least 60% of AUM to outperform benchmark or peer group over rolling three-year periods.

Benefits

Consistent outperformance increases value for our clients and is a driver of growth in new business.

Risks

Performance can fall short of targets.

Key risks (chart)

Results:

74% The percentage of AUM that outperformed over three years to 31 December 2016 (2015: 72%)

Key Performance Indicators (chart)

Our expectations for 2017:

The investment environment was relatively challenging in 2016 with macro uncertainty driving volatility in markets and currencies and a high level of asset class correlation. Volatility could impact short term performance figures in 2017.

Over 12 months to 31 December 2016, 75% of assets outperformed benchmark or peer group (2015: 53%). Long-term performance is strong with 85% of assets outperforming over five years (2015: 76%).

Measurable by:

Levels of gross and net flows.

Benefits

Forming closer partnerships with our clients will allow us to better understand their financial goals and construct a solution to meet them. This will lead to improved client longevity and increased new business opportunities.

Risks

Products that do not meet their objectives can put client relationships at risk.

Key risks (chart)

Results:

£80.8bn Gross flows(2015: £84.1bn)

£1.1bn Net inflows(2015: £13.0bn)

Key Performance Indicators (chart)

Our expectations for 2017:

In 2017, gross and net flows may be impacted by market uncertainty. Volatility can weigh upon client sentiment, particularly in the intermediary markets.

However, with a broad product range and highly diversified business model, we are well placed to continue to grow our business.

Measurable by:

Targeting a total cost ratio* of 65% and total compensation ratio* of between 45% and 49% depending on market conditions.

Benefits

Greater operational efficiency and higher productivity will lead to generating higher levels of profit after tax, enabling increased dividends and continued organic investment in our business.

Risks

In weaker markets, the ratios may be higher than our long-term targets.

Key risks (chart)

Results:

64% Total cost ratio(2015: 63%)

Key Performance Indicators (chart)

44% Total compensation ratio(2015: 44%)

Key Performance Indicators (chart)

Our expectations for 2017:

We are targeting a total compensation ratio towards the lower end of our target range in 2017.

Measurable by:

Developing our employees and retaining our highly rated people.

Benefits

Developing and retaining our people is key to organisational stability and the long-term effective delivery of our business model.

Risks

Our people are frequently targeted by competitors seeking to build their business.

Key risks (chart)

Results:

95% Percentage of highly rated employees retained (2015: 94%)

94% Percentage of employees proud to be associated with Schroders(2015: 93%)

Our expectations for 2017:

We actively seek to retain and develop our highly rated employees, more information on which is in chapter Our people.

Retention rates have remained high in recent years but could be negatively affected if competitors recruit more actively.

Measurable by:

A strong capital base allows for investment in both organic growth and acquisition opportunities. Seed capital deployed supports the development of new investment strategies.

Benefits

Building shareholder value over the long term.

Risks

In the short term, particularly during periods of market weakness, profitability can be adversely affected.

Key risks (chart)

Results:

£1.1bnInvestment capital(2015: £942m)

£325m Seed capital(2015: £229m)

Our expectations for 2017:

As clients’ changing needs require innovative products, seed capital could increase in 2017.

Volatile markets could lead to short-term losses on investment capital, although we remain well positioned for the long term.

* See glossary.