UBS has cut its recommendation for asset manager Schroders from 'neutral' to 'sell', saying that expectations are too high.

"We downgrade Schroders to 'sell' as we believe that expectations on flows and on capital returns have led the stock to re-rate vs peers while we remain cautious on both points," the broker said.

"Furthermore, we expect some headwinds to management fees, as flows are in lower margin products, and to profit margins, as the company is investing in its platform. We see limited risk of substantial inflows as performance has deteriorated."

While industry data is pointing to improving flows (notably in Europe), UBS thinks it is too early to call for strongly flows to return to Schroders "especially when considering performance that has deteriorated compared to a year ago and flows remaining concentrated into top performers."

The shares trade at 15.8 times full-year earnings, 3.4 higher than its peers, while the dividend yield is just 2.5% compared with the 4.7% average in the sector.

The target price has been lifted from 1,330p to 1,470p.

Shares were down 1.81% at 1,515p by 10:30.

BC

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Schroders (SDR) share price