7 June 2021
SCHRODERS IN FOCUS Private Assets The significance of Private Assets for Schroders
WELCOME
PETER HARRISON Group Chief Executive Why growing Private Assets and Alternatives is of strategic importance to us
Further diversifying Increasing margins Area of high Growing Solutions Group revenues and longevity of sustained client by enabling public / assets demand private combinations
OVER THE PAST 5 YEARS, WE HAVE BUILT A BUSINESS CAPABLE OF GENERATING £6–9BN OF NET NEW BUSINESS PER YEAR The opportunity in Private Assets and Alternatives is substantial
Alternative asset management industry, AUM $tn And we are well positioned to capture the institutional and retail demand
+8% p.a. Institutional Individual investors
$21tn Institutional AUM in private Individual investors: +11% p.a. Opportunity markets: ~$14tn (2020E) 42% of total AUM
$14tn
Individual investor Institutional allocations: $10tn Allocation allocations to private +1.3% in 2021 to 14.1% markets: 5% $7tn $5tn $3tn Schroders’ Schroders Institutional Schroders intermediary presence AUM: £369bn (2020A) AUM: £134bn (2020A)
2004 2007 2012 2016 2020E 2025E
Source: BCG Global Asset Management 2020, McKinsey Global Private Markets Review 2021, Schroders Institutional Investor Study 2020. We have been executing on our private markets plan since 2015
1972 2013 2015 2016 2017 2018 2019 2020 2021
Impact Investing
Real Estate Real Estate Real Infra- Securitised Private Real Estate (Germany (APAC Real Estate Estate ILS structure Credit Equity (Hotels) Value Add) Value Add) Debt
Source: Schroders Capital, May 2021. Continuing our strategic pivot into higher margin and higher client longevity areas…
Private Assets and Alternatives AUM development and cumulative net flows £bn £bn £48BN AUM 50 12 21% 5 YEAR AUM CAGR 45 10 £2.9BN OF YTD NET 40 INFLOWS 35 8 (as at May-21)
30 £2.3BN ADDITIONAL 6 COMMITMENTS NOT YET 25 RECOGNISED IN FLOWS 4 20 (as at May-21)
15 2 66BPS REVENUE MARGINS incl. performance fees and 10 carried interest (2020) 0 5
0 -2 2015 2016 2017 2018 2019 2020 Apr-21 AUM Cumulative net flows (rhs) Growing Private Assets and Alternatives is driving up group longevity
Group rolling 3-year client longevity
4.80
4.75 PRIVATE ASSETS 4.70 AND ALTERNATIVES 4.65 4.60 3 YEAR CLIENT 4.55 LONGEVITY IN 4.50 EXCESS OF 7 YEARS 4.45
4.40
4.35
4.30 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Diversified Alternatives business delivering outperformance over time
Helix cumulative fund performance since inception, I-share class 30% Liquid Alternatives produced in-house, e.g. Helix 25% 3rd party Alternatives platform 20% (GAIA) with £2.8bn of AUM as at Apr-21
15% Providing access to top selection of 3rd party managers 10% Incubation of in-house 5% strategies and access to world class Alts managers 0% GAIA is the 3rd largest -5% Alternatives platform in Europe Jul-19 Jul 19 Jan-21 Jul-20 Apr-21 Jan-19 Jan 21 Jun-19 Apr-19 Apr 21 Apr Jul 20 Jul Feb-21 Jan 19 Oct-19 Apr 19 Feb-19 Jun 19 Sep-19 Feb 21 Feb Oct 19 Feb 19 Mar-21 Dec-18 Sep 19 Dec-19 Mar-19 Aug-19 Mar 21 Nov-19 Dec 18 Jan-20 Dec 19 Mar 19 Aug 19 Jun-20 Apr-20 Oct-20 Nov 19 May-21 Jan 20 Feb-20 Sep-20 Apr 20 Apr May-19 Jun 20 Jun Oct 20 May 21 Feb 20 Feb Dec-20 May 19 Sep 20 Mar-20 Aug-20 Nov-20 Dec 20 Mar 20 Aug 20 Aug Nov 20 Nov May-20 May 20
Schroder GAIA Helix I Acc Market down months
Source: Bloomberg, as at 26 May 2021. A comprehensive Private Assets business
Revenues by split by Private Asset verticals excluding Alternatives, £m
STRONG INVESTMENT Impact Investing PERFORMANCE 36 Private Equity 70 ABILITY TO DEMOCRATISE Insurance-linked PRIVATE ASSETS 19
LEVERAGE SUSTAINABILITY Infrastructure £247m POSITION 8 revenues LARGE NUMBER OF MATURING PRODUCTS Private and Structured Credit 26 Real Estate 90 Introducing Schroders Capital
OUR GROWTH STRATEGY
GEORG WUNDERLIN Global Head of Private Assets A diversified and scalable private markets platform set for growth…
£43bn 30+ Assets under management investment capabilities Private Equity £9.1bn Small and mid-sized buyout in Europe and US as well as Growth investment in Asia and Global venture capital 250+ Securitised Products £9.4bn investment professionals Full spectrum of securitised assets and asset-related private debt in data-rich credit sectors across the US, Europe and APAC
Real Estate £16.7bn 451 Operational excellence, hospitality and sustainability expertise employees driving performance across the value chain in Europe and Asia
Infrastructure £2.1bn Essential infrastructure in Europe across the capital structure 82% of assets outperforming over 5 years Insurance-linked Securities £2.5bn Uncorrelated long-term returns across life and non-life insurance risk globally > 11 years Impact Investing £2.7bn A global impact investment capability dedicated to generating 3 year avg. client longevity (2020) lasting positive changes and attractive returns Note: AUM as at April 2021 (excludes non fee-earning dry powder). …driven by our world-class leadership team
22 yrs 27 yrs 25 yrs 24 yrs 15 yrs Industry Industry Industry Industry Industry
Georg Wunderlin Peter Arnold Peter Arnold Rainer Ender Philipp Müller Global Head of Private Assets Co-Head of Private Asset Sales Chief Operating Officer Global Head of Private Equity CEO BlueOrchard
25 yrs 23 yrs 19 yrs 23 yrs 25 yrs Industry Industry Industry Industry Industry
Sophie van Oosterom Chantale Pelletier Nick Pont Nils Rode Stephan Ruoff Global Head of Real Estate Global Head of Infrastructure Head of Product Strategy - Private Chief Investment Officer Global Head of ILS Debt
27 yrs 32 yrs 15 yrs 26 yrs Industry Industry Industry Industry 328 years Combined experience
Michelle Russell-Dowe David Seex Ed Smith Maria Teresa Zappia in Private Assets Global Head of Securitised Co-Head Private Asset Sales Head of Private Assets Legal Head of Sustainability and Impact Products and Asset Based Finance Head of Private Assets Solutions We have grown twice as fast as the market since 2016 Ambition to double again in the next five years
Schroders Capital AUM Fee earning AUM £bn
100
75 Real estate 2x Private Equity 50 Insurance-linked Infrastructure Private and Securitised Credit 25 Impact Investing
0 2015 2016 2017 2018 2019 2020 Apr-21 2025E
c. 45% 28% £3.9BN £2.8BN OF AUM IN CLOSED- 5 YEAR AUM CAGR GROSS INFLOWS NNB END VEHICLES AS AT MAY-21 AS AT MAY-21 We are well positioned to profit from the fundamental trends shaping private markets in the next decade
Client needs and The zero rate Sustainability is now a Competitiveness in Individual investors expectations have environment calls for paradigm shift where private markets requires are the new source of institutionalised and new ways to deliver leadership in Impact scale, operational demand for private seek to partner with income to our clients Investing is the path to excellence and markets and private consolidated global where private debt and capturing the New integrated ESG equity is their first port platforms able to Securitised Credit are Private Markets approach of call deliver their franchise centre stage end-to-end
Maria Teresa Zappia Sophie van Oosterom Rainer Ender Nick Pont David Seex Head of Sustainability and Impact Global Head of Real Estate Global Head of Private Equity Head of Product Strategy - Private Co-Head Private Asset Sales Debt Head of Private Assets Solutions Capturing the sustainability and impact opportunity
OUR GROWTH STRATEGY
MARIA TERESA ZAPPIA Head of Sustainability and Impact The market opportunity Sustainability and impact investing represents a paradigm shift
ESG-Committed* Private Capital Impact Investing industry: continuous strong growth Fundraising by year of final close $bn Impact Investing AUM (public and private markets) $bn
468 715 417 403 344 309 502 270 282
228 114 46 60 77
2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019
ESG as “impact” About 40% of asset owners have planned and/or consider to focus on carbon and impact measurement and reporting as part of their ESG approaches in private markets
Source: Preqin, Global Impact Investing Network (GIIN) 2014-2020. *Asset managers that are incorporating ESG into their business, defined either as having an ESG policy, or belonging to a relevant association, such as GRESB, PRI, or SASB. **Bfinance ESG Asset Owner Survey: How are investors changing? Feb. 2021. BlueOrchard: An impact and sustainability powerhouse
SUSTAINABLE PRIVATE DEBT PRIVATE EQUITY LISTED DEBT INFRASTRUCTURE
£2.7bn 1st Of AUM across private and largest microfinance assets classes (as at Apr-21) fund worldwide 110+ 49% 90 countries staff female across emerging and frontier markets Sophisticated private, institutional and public sector clients 20 years Financial inclusion climate experience in finance education finance Impact Investing women empowerment
7 OFFICES GENEVA LIMA LUXEMBOURG NAIROBI SINGAPORE TBILISI ZURICH
Source: BlueOrchard. Map indicates all investments by country as of 31 December 2020 since inception, figures as of 31 December 2020. Our BlueOrchard COVID-19 blended finance impact fund
Collaboration between partners Addressing SDGs Expected impact (per each $100m)
No poverty 60 million jobs to be maintained
Gender Equality 3 million micro-entrepreneurs to be served Decent work and economic growth 20 financial institutions to be Reduced inequalities financed
Source: BlueOrchard. Leveraging sustainability and impact capabilities across Schroders Capital’s products
Impact Investing (BlueOrchard) Private Equity
Securitised Products £43bn Schroders Capital Insurance-linked Investments AUM
Real Estate Infrastructure
300+ OPIM 5 6 Asset class specific ESG A transparent sustainability and dedicated private assets impact management and metrics across the entire impact investment framework ESG specialists measurement team resources private assets portfolio based on best practices*
*Operating Principles for Impact Management see: www.impactprinciples.org. From allocation to operating expertise
OUR GROWTH STRATEGY
SOPHIE VAN OOSTEROM Global Head of Real Estate From allocation to expertise: Exciting market dynamics provide opportunity to excel
MARKET SHIFT SCHRODERS INVESTED INVESTMENT APROACH FOR GROWTH
Increased allocation to Real Expanded breadth and depth Estate equity and debt of platform
Add on acquisitions with Shift to operational expertise operational excellence
Integrated ESG and Impact ESG and Impact focus approach
Source: 1INREV Investor Intentions Survey 2021, 2Real Capital Analytics. Schroders Capital Real Estate positioned for success £17bn Real Estate AUM RE AUM development, £bn 20 220+ 18 16.7 employees 16
14 11% 5 year 20 12 CAGR countries invested 10.1 10
8
6 12 RE offices globally 4
2 0 c.400 December2015 2015 AprilApr-21 2021 properties managed UK Europe Indirect Solutions Asia Hotels
Source: Schroders. From being a trusted partner in Real Estate in 2015…
INTEGRATED ESG
EUROPE ASIA PACIFIC GLOBAL
Real Estate Equity
RISK/RETURN Core (+)
UK Core (+) Natalie Howard UK Multi manager Head of Real Estate Debt Continental Europe Core (+) (30/1)
Source: Schroders, February 2021. …to being a global real estate solution provider with a hospitality and sustainability mindset in 2021
INTEGRATED ESG
EUROPE ASIA PACIFIC GLOBAL
Specialist Operational Real Estate Asia Value Add and Hotels Senior Living 2018 Integrated Opportunistic Social Housing Value Add Real Estate 2020 Partnerships Global Debt 2019 and Equity Solutions 2021 RISK/RETURN Core (+) 2021– UK Core (+) Natalie Howard Multi manager UK Head of Real Estate Debt Continental Europe Core (+) (30/1)
Source: Schroders, February 2021. ESG is in our collective DNA
Risk monitoring Mitigate impact and output Impact investing – Leverage proprietary Schroders – Targeted investment to mitigate – Collaboration with Blue Orchard technology impact of our portfolio on environment – 750bn+ market size – Measure impact of environment on – Leverage 20 years of impact expertise – Deliver social impact alongside our portfolio – Net Zero pathway all assets financial gains – Measure impact of our portfolio on – Launch of new Impact fund series environment UK and Europe – Regulatory framework
Integrated ESG approach across the entire value chain Perfectly positioned to realise full potential BUILDING ON OUR STRENGTHS
Real Estate AUM development £bn 35.0 Global Solutions leverage on breadth and depth of platform 30.0
25.0 Debt 2x Impact Building on expertise 20.0 Asia Specialist and value-add strategies: hotels, residential and Solutions Asia leading 15.0 Specialist Real Estate debt offer Indirect 10.0 Hotels Diversified 5.0 Impact investing a key growth initiative across UK and Europe 0.0 2015 2020 2025E
Source: Schroders Capital, June 2021. Democratising super returns
OUR GROWTH STRATEGY
RAINER ENDER Global Head of Private Equity Schroders Private Equity platform strength and growth
Private Equity AUM development £bn STABLE TEAM 10.0 9.1 9.0 DIFFERENTIATED 8.0 INVESTMENT STRATEGY 7.0 6.5 6.0 STRONG TRACK RECORD 5.0 4.0 ESG EMPHASIS 3.0 2.0 DATA SCIENCE 1.0 - AUM Aug-17 AUM Apr-21
Integrated Funds Transactional Funds Integrated Mandates Transactional Mandates Democratisation Products Global Private Equity platform that has proven itself for more than 20 years
GEOGRAPHY SEGMENT INDUSTRY TYPES
– North America – Venture – Technology – Direct Investments – Europe – Growth – Healthcare – Co-Investments – Asia – Buyout – Consumer – Secondaries – Rest of World – Turnaround – Business Services – Primaries – Industrial
Strong network with specialised private equity managers around the globe 50% of investment volume through direct investments, co-investments and secondary transactions
Source: Schroders Capital Private Equity, 2021. Our track record across all our investments has clearly delivered
Quarterly results of all Schroders Capital Private Equity investments 19% NET IRR ACROSS ALL 14% INVESTMENTS SINCE 2010… 12% … WITH 7% P.A. 10% OUTPERFORMANCE OVER 8% MSCI WORLD (PME) 6%
4% 31% NET IRR ON
2% REALIZED DIRECT AND
0% CO-INVESTMENTS -2% 25% PERFORMANCE IN 2020 -4% LESS THAN HALF OF THE -6% MSCI WORLD VOLATILITY Q1 2011 Q1 2017 Q2 2011 Q2 Q1 2012 Q1 2015 Q3 2011 Q1 2013 Q1 2018 Q1 2014 Q4 2011 Q1 2016 Q1 2019 Q2 2017 Q2 Q3 2017 Q4 2017 Q2 2012 Q2 Q2 2015 Q2 Q3 2012 2013 Q2 Q2 2018 Q2 Q3 2015 Q2 2014 Q2 Q4 2012 Q4 2015 Q2 2016 Q2 Q2 2019 Q2 Q3 2013 Q3 2018 Q3 2014 Q4 2013 Q4 2018 Q3 2016 Q3 2019 Q4 2014 Q1 2020 Q4 2016 Q4 2019 Q2 2020 Q2 Q3 2020 Q4 2020
Source: Schroder Adveq. Generating strong follow-on growth over the last 4 years Comparison of our Private Equity platform May 2017 vs. May 2021
Pre-acquisition May 2017 Today as part of Schroders May 2021
Investment Committee unchanged
Investment strategy unchanged
Products Limited Partnerships Broadened product range
Client origin Predominantly Germany and Switzerland Increasingly international
Client type Institutional only Institutional and Intermediary
Funds raised previous 2 years £1.2bn (May 2015–2017) £3.0bn (May 2019–2021)
Source: Schroders Capital Private Equity, 2021. Growing portfolio of products addressing the democratisation of Private Equity
Gaia II SPE Schroder UK Public Schroder British Schroder BSC Live Products Semi-liquid fund Private Trust Opportunities Trust Social Impact Trust Already represent £675m Launched in Taken over in IPO in IPO in AUM with 100bps margin Sep 2019 Dec 2019 Nov 2020 Dec 2020
Further semi-liquid funds Combining Public/Private Multiple Private Assets Targeting different client Cross-over strategy Combine Debt and Equity markets with different Overcome structural Yield focus Product Plans investment strategies segmentation
Source: Schroders Capital Private Equity, 2021. Private Debt: Navigating The Zero
OUR GROWTH STRATEGY
NICK PONT Head of Product Strategy - Private Debt #TheZero is driving investors to reallocate to private debt
Interest rate spread (bps) Historical loss rates (net of recoveries)
1,200 3.0% Liquid Credit Illiquid Credit
1,000 2.5%
800 2.0%
600 1.5%
400 1.0%
200 0.5%
0 0.0% £ AAA £ BBB $ BBB $ HY Infra Debt Infra Debt RE Debt RE Debt RE Debt Direct Opport. IG Corporate Senior Senior Real Estate Junior HY Corporate Mid-Market Direct (€ IG) (€ Sub-IG) (IG) (Snr. Loan) (HY) Lending Bonds Infra Debt Debt Infra Debt Bonds Lending
Source: Ares Management Corporation, Bank of America Merrill Lynch, Callan Associates, Cass Business School, CBRE, De Montfort University, Moody’s, Preqin, S&P LCD and Schroders, 2020. Note: IG and HY corporate bond credit loss rates incorporate default losses (default rates adjusted for recovery rates) and price changes arising from changes in credit quality (net downgrade losses). Figures are shown for illustrative purposes only and may not be reflective of credit spreads or default experience on any individual investment or portfolio. Schroders Capital expanding private debt capability is delivering diversification, core income and true excess return
Private Debt capability Target client segments
Securitized Credit Pensions, Endowments, Consultants, Complete range from benchmark aware to private credit and debt Insurance, Banks
Infrastructure Debt Insurance, Pensions IG Euro & Sterling, Junior Euro & Sterling
ILS Insurance, Pensions, Intermediary Cat. Bond, All and Life ILS
Impact Investing Institutional (inc. DFIs), Microfinance, EM infrastructure debt Intermediary
Real Estate Debt Insurance, Pensions IG, Senior Loan & HY
Corporate Loans (Aus.) Superannuation, Insurance Nascent
Diversified Illiquid Income Solutions UK DB pensions Multi-Private Credit Fund (MPCF) Providing access to full continuum of private asset income streams
24.0 <3% 3–6% 6–9% >9% Lower income Higher income higher equity beta higher equity beta Global Cities Real Estate Inc. Sec. Credit (Opportunistic Loans) MPCF ILS (All / Life) Securitised Credit (Loans)
16.0 Europe Core+ RE EstimatedVolatility UK Core+ RE Infra Equity Infra Debt (Junior) RE Debt (HY) UK Core RE BO (Sustainable Infra) Infra Debt (Senior) RE Debt (Senior Loan)
8.0 BO (Covid 19 Support)
Securitised Credit (High Grade) RE Debt (IG) GAIA Cat Bond
Lower income BO (Microfinance) Higher income lower equity beta higher equity beta
-
Lower liquidity Higher liquidity Target Yield
Source: Schroders Capital. Schroders Capital well positioned with expanding private debt capability
Capability Scale of platform Success to date
Securitized Credit AUM £9.4bn $1.5bn raised in Focus II in 2020 Complete range from benchmark aware to private credit and debt
Infrastructure Debt AUM £1.5bn Julie II on track for target raise of >€1bn IG Euro & Sterling, Junior Euro & Sterling
ILS AUM £2.5bn World’s largest Cat Bond fund Cat. Bond, All ILS and Life ILS
Impact Investing AUM £2.6bn World’s largest Microfinance fund Microfinance, EM infrastructure debt
Real Estate Debt Nascent Team in place/fundraising starting 2H21 IG, Senior Loan & HY
Corporate Loans (Aus.) Nascent Team in place/fundraising starting 2H21
Diversified Illiquid Income Solutions Nascent Team in place/fundraising starting 2H21 Multi-Private Credit Fund (MPCF)
Source: Schroders Capital AUM as at April 2021 (excludes non fee-earning dry powder) Leveraging our capability to meet our clients needs
OUR GROWTH STRATEGY
DAVID SEEX Co-Head Private Asset Sales and Head of Private Assets Solutions Institutions want fewer but more strategic relationships Illustration: Schroders Capital Private Equity
Average account size 2017 vs. 2021 (£m) Product flows vs. mandates
£1.2bn raised £3.0bn raised 200 100% 90% 175 65% growth 80% 40% 150 70% 55% 125 60%
100 50% 40% 75 30% 60% 50 20% 45% 25 10%
0 0% May1 2017 May 20212 May 2015-2017 May 2019-2021 Average account size Average account size of top 50 clients Mandates Funds
Source: Schroders Capital, May 2021. Righthand chart references the two years prior to Schroders acquisition in 2017, and then the two most recent years (2019-2021/current). Our client base is our foundation for growth
A structured path to doubling of AUM
Win individual Schroders investors Capital Add new (Democratisation) institutional Cross sell our clients capabilities to Schroders existing clients Capital
AUM 2021 AUM 2025 Leveraging the entire organisation
Global Strong Schroders Global client distribution intermediary Solutions network network business mindset
4,000+ 582 £133.5bn £192bn Schroders Institutional Schroders global Distribution Schroders intermediary AUM Schroders Solutions business client relationships professionals 676 29 Schroders £22bn Schroders Insurance Schroders Capital sales Personal Wealth Schroders Capital Solutions clients professionals 30,000 mass affluent and business HNW clients
900+ 34 Schroders Wealth Schroders Capital Global offices clients around the world Management £73bn wealth management business 4 key takeaways
Cross sell to our Use innovation and existing private investment edge to markets clients win new clients DOUBLE AUM IN THE NEXT FIVE YEARS
Adopt a solutions approach and leverage the whole Schroders Democratize organisation Private Assets Summary
OUR GROWTH STRATEGY
GEORG WUNDERLIN Global Head of Private Assets We are set to double our AUM by 2025
A strong and fast-growing business today… ... perfectly positioned to achieve future ambitions
30+ capabilities covering all asset- 28% AUM CAGR since 2015 classes, pursuing a disciplined build- out
Able to generate £5-8bn of net new Edge in growth segments: Impact, business p.a. out of the £6-9bn for income, democratization, solutions Private Assets and Alternatives
Attractive home to Private Asset Operating at a 3-year client talent as proven by M&A and longevity in excess of 11 years organic growth THANK YOU