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Taking a knife to forecasts, Daniel Davies at Credit Suisse has slashed his target price on asset management group Schroders by a third. Formerly predicting £15.70 for the stock, his new target sits at just £10.50, a reaction to his view that Schroders will struggle in increasingly difficult markets.

The earnings downgrades and target price cut come after last week’s first-quarter trading update revealed assets under management (AUM) had fallen 6% between 31 December and 31 March from £139.1 billion to £130.6 billion.

Barring a £1.7 billion net outflow in institutional business, which was offset by a £0.5 billion net inflow of retail funds, most of the AUM decline was due to weakening equity markets rather than ‘underlying problems’ specific to Schroders.

Davies believes the asset manager will struggle to attract new money as markets remain depressed. He is now expecting zero net fund inflows for 2008 compared with £5 billion previously, and cut his EPS

forecast by 20% from 98.5p to 79p.

by Simon Keane