Emerging Wealth, Aging Populations And ESG Trends Will Spark Expansion

Key Takeaways

• Deepening client relationships, strategic core focus, and expanded use of the balance sheet position Schroders for above-industry growth and higher earnings than analysts predict.
  
• Global wealth trends, demographic shifts, and digital transformation will expand Schroders' market reach, enabling margin expansion and sustained long-term earnings growth.
  
• Shifts toward lower-cost strategies, rising competition, greater regulatory pressures, and limited global scale threaten Schroders' margins, client retention, and future earnings resilience.

Catalysts

A publicly owned investment manager.

• Analyst consensus already recognizes the stabilizing influence of focusing on nine core capabilities in Public Markets and forecasts a reversal of revenue declines by 2027; however, this could prove overly conservative, as deep client relationships-evidenced by record global mandates and clients returning to active strategies-suggest the group is positioned to outpace industry AUM and revenue growth during periods of market rotation, potentially leading to structurally higher revenue and operating profit than currently modelled.
  
• Analysts broadly agree that Schroders Capital's plan to deliver £20 billion in cumulative net new business is a major long-term catalyst driven by specialist expansion and new sales capacity, but this view underestimates the potential self-reinforcing effect of the company's balance sheet commitment-a sharp increase in seed and co-investment will accelerate growth and bring forward scale economies, supporting higher net margins and faster earnings growth, especially given Schroders' proven ability to convert gross fundraising into sticky, fee-rich AUM.
  
• The global rise in private and mass affluent wealth, especially in Asia Pacific and emerging markets, is expected to create a super-cycle in demand for both wealth management and asset management solutions, which Schroders is unusually well positioned to capture due to its international footprint, brand recognition, differentiated JV platform, and market-leading organic net new business growth-offering long-duration tailwinds for AUM, net revenues, and fee-based earnings far beyond consensus expectations.
  
• Rapid demographic shifts, including ageing populations in developed markets and growing pension/retirement needs, are set to fundamentally expand the group's addressable market in high-margin retirement planning and pension solutions, allowing Schroders to both grow mandates and harvest higher fee income as corporate and institutional clients increasingly outsource complexity to scaled global partners.
  
• Schroders' extensive investment in platform modernization, digital transformation, and the transition to multi-channel delivery including active ETFs positions the group to unlock significant operating leverage, lower client acquisition costs in new segments (retail, advisers, and next-gen wealth), and compound net margin expansion as digital scale and supplier rationalization yield lasting efficiency gains across the business.

Schroders Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Schroders compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Schroders's revenue will decrease by 2.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 13.8% today to 23.6% in 3 years time.
• The bullish analysts expect earnings to reach £656.6 million (and earnings per share of £0.41) by about July 2028, up from £417.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 13.1x on those 2028 earnings, down from 15.3x today. This future PE is lower than the current PE for the GB Capital Markets industry at 13.4x.
• Analysts expect the number of shares outstanding to decline by 0.71% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.33%, as per the Simply Wall St company report.

Schroders Future Earnings Per Share Growth

Risks

• The ongoing migration from active to passive investment strategies, combined with persistent fee compression in the asset management industry, threatens Schroders' ability to maintain revenue growth, as clients continue shifting assets to lower-cost options and pressure profit margins over the long term.
  
• Increasing competition from technology-driven platforms, direct indexing, and fintech competitors intensifies disintermediation of traditional firms like Schroders, raising the risk of diminished client retention and lower new inflows, posing a medium
• to long-term threat to revenue and client loyalty.
  
• Heightened global regulatory scrutiny, including ESG mandates and new compliance regimes, is driving up operational complexity and compliance costs, which could further erode net margins, particularly given Schroders' international exposure and complex cross-border operations.
  
• Historical underperformance of some actively managed funds and ongoing margin erosion in Public Markets signal continued headwinds for Schroders' core active asset management business, potentially restraining future earnings and endangering the company's ability to attract and retain clients versus larger, more cost-efficient "megamanagers."
  
• Schroders' limited global scale compared to industry giants, as well as its significant reliance on UK and European core markets, makes the group increasingly vulnerable to regional economic stagnation, capital outflows, and competitive disadvantages in technology investment-factors that may negatively affect group-wide earnings resilience, revenue growth, and net margins.

Valuation

• The assumed bullish price target for Schroders is £4.4, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Schroders's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £4.4, and the most bearish reporting a price target of just £3.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be £2.8 billion, earnings will come to £656.6 million, and it would be trading on a PE ratio of 13.1x, assuming you use a discount rate of 8.3%.
• Given the current share price of £4.06, the bullish analyst price target of £4.4 is 7.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.