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This week’s £9.9bn takeover of Schroders, the UK’s largest independent asset manager, is a seminal event for the City of London. Once again, a British financial services company is being swallowed up by a foreign acquirer because it lacks the scale to match much larger rivals.
It also closes a cultural chapter in the City’s history. Schroders was founded in the early 19th century by Johann Heinrich Schröder, a banking immigrant from Hamburg, and is still controlled by his descendants, although it is a UK-listed company. Schroders’ loss of autonomy marks the end of a period when German-born bankers drove the City’s postwar growth.
Many US and European financial services groups are still attracted to the financial entrepot of the City, despite Brexit. JPMorgan and Deutsche Bank are among the biggest investment banks operating there. Another is Citigroup, which bought Schroders’ investment bank in 2000. The remaining business is being acquired by Nuveen, a Chicago-based asset manager.
But there was an era when Schroders and SG Warburg, the merchant bank and asset manager founded in London in 1934 by the German (later British) banker Siegmund Warburg, were the City’s prime movers. From the 1960s creation of the Eurobond market to the new business of running corporate pension funds (today’s asset management) they broke with tradition.
Some of this came from the energy of outsiders. Warburg fled the Nazis to London and the writer Anthony Sampson called him one of “a small band of [City] strangers with very little to lose and a lot to gain”. The bankers of SG Warburg worked long hours and were held to meticulous standards by him and Henry Grunfeld, another émigré, who was his closest partner.
Schroders integrated earlier into the establishment. Johann Heinrich’s grandson Bruno naturalised as British when the government threatened to seize it at the start of the 1914-18 war. Its asset management business was started in the 1950s by Michael Verey, an old Etonian who later became chair, at a bank that Schroders acquired.
The Schroder family retained control after it went public and it was later headed by Win Bischoff, once described in a Lunch with the FT as appearing to be “the embodiment of the old-school British banker” but born Winfried Franz Wilhelm Bischoff in Aachen. It was chaired then by George Mallinckrodt, brother-in-law of a later Bruno Schroder, patriarch until his death in 2019.
In financial terms — what others are there in the City? — Schroders has had the last laugh. SG Warburg ended up being sold off chaotically in 1995 to Swiss Bank Corporation, while Mercury Asset Management, its investment arm, was acquired by Merrill Lynch for £3.1bn in 1997. In inflation-adjusted terms, this was about two-thirds of the price that Schroders fetched this week.
Schroders hung on longer because Bruno Schroder did not want to let go. Its share price had declined as it fell behind US groups such as BlackRock, where Mercury ended up. But it was hardly in crisis, expanding this financial year and making £674mn pre-tax profit. “I’m very surprised. I thought things would have to get worse before the family sold,” one financier says.
This generation of the Schroder-Mallinckrodts clearly had less sentimental attachment to owning a City asset manager. But there were also solid reasons to make the break. Not only are others larger, but the threat of AI changing what has been a talent-based business looms. Technology and globalisation threaten the intimacy of the City where Schroders was founded.
It is tempting to see this as a story of loss, another case of the “Wimbledon effect”, in which the City plays host to financial services companies but the most important players are no longer British. But in the long sweep of history, is it really? Schroders shed its umlaut in 1957 and history will record that it was a British company, but much of its culture originated elsewhere.
Financiers move around like capital does: they are among the citizens of nowhere of whom Theresa May, former prime minister, so disapproved. A lot of creativity and innovation comes from the alchemy of newcomers meeting a place of tradition and working out how to change it. They later become so integrated that many people forget they were not always British.
Even when sold, some magic remains. City myth had it that Mercury Asset Management was named after Henry Grunfeld, whose initials were the chemical symbol for mercury (he denied it). When Hg, the successful London private equity firm, spun out of Merrill Lynch in 2000 after Merrill bought Mercury, it took those letters. It is a small memento of a long tradition.
john.gapper@ft.com
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