Schroders' funds suffer a £9bn blow

The fund manager, private banking and private-equity firm, one of the biggest names in the City, said today that its funds under management are £9 billion lighter than they were at the start of the year and its profits have dived 27% for the first half of the year.

Chief executive Michael Dobson warned: "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."

Schroders said it was seeing rising redemptions of investments and " significant outflows" in Europe, as investors take their money out of shares on bourses around the Continent.

In a statement Schroders said: "As expected, falling equity markets and high levels of volatility have had a significant impact on retail investor demand, and industry flows out of equity mutual funds continued in the second quarter."

At 30 June, funds under management had fallen to £130 million from £139 billion at the end of 2007.

While new business wins from institutional clients was up 28% in its asset management business, net outflows from those clients totalled £1.1 billion in the six months. In the profit and loss account a 10% rise in profits to £136 million from Schroders' asset management business, and a near-50% leap in profits to £22 million in its revitalised private banking business, were wiped out by the performance of its venture capital investments.

Its private-equity business raised profits of just £7 million in the half year, down from £36 million in the same period last year. This reflected "fewer opportunities to exit from long-standinginvestments," said a spokesman . Schroders also booked a £30 million writedown on seed capital investments in start-ups and on certain bond investments.

First-half pre-tax profits were £50 million lower, at £135 million.