Citi has upgraded Schroders PLC (LSE:SDR) to ‘Buy’ following its recent share price weakness, with the bank highlighting improving trends in the traditional asset management sector in the third quarter.
Schroders shares, up more than 2.5% on Friday, have seen a softer few weeks since August, though at 390.4p the asset manager's stock is up close to 20% over 2025 to date.
The bank said flows into European traditional managers were solid in the quarter, supported by rising markets and a notable pick-up in active fund flows, particularly into fixed income. Over the last six months, active flows have reached their highest levels since late 2021, it noted.
Citi expects all covered traditional managers to report net inflows and to exceed consensus expectations for flows, assets under management, and earnings in the quarter.
While shares in many traditional managers have already re-rated, Citi sees Schroders as a relative laggard and an opportunity for investors.
The bank retains ‘Buy’ ratings on both Schroders, whilst it is 'Neutral' on Aberdeen Group PLC (LSE:ABDN) and Man Group PLC (LSE:EMG).
Nevertheless, Citi said it continues to prefer alternative asset managers, which the bank reckons offer stronger growth potential at only a modest valuation premium, and private markets activity is also showing signs of recovery.