Schroders, the fund manager, lost £2.5 billion of institutional fund assets during the first quarter but still managed to record a 30 per cent jump in pre-tax profits to £93.2 million.

Michael Dobson, the chief executive of the FTSE 100 group, told Times Online that Schroders was taking all the right steps to stem the move of institutional investors away from traditional, "balanced" funds.

At the same time he admitted that problems in Japan were not yet over and more client losses were to be expected. He said that new funds launched, and acquisitions made, showed Schroders was diversifying well.

He also said that retail investors were piling into his funds in the UK, continental Europe, Asia Pacific and the United States.

"Yes, we have had outflows, although within institutional, revenues have been growing," Mr Dobson said. "I would read this [today's trading update] as a continuation of the strategy, to focus right across the board on higher value and higher margin, as opposed to higher volume business."

Schroders' first-quarter pre-tax profits jump came on revenues from asset management up 16 per cent at £177.3 million. Revenues from private banking rose almost £3 million to £23.1 million, while profits from private equity almost trebled at £19.9 million.

In the UK, Schroders' instutional client losses included the Strathclyde Pension Fund, one of Schroders' biggest UK clients, which withdrew a £1.4 billion balanced mandate last December.

But Schroders said that retail investors had given it £1.5 billion of fresh funds to manage during the three months to the end of March.

This, combined with assets of £1.3 billion picked up through its acquisition of Aareal Asset Management, the continental European property manager, earlier this year, meant Schroders finished the first quarter with funds under management of £132.3 billion, up from £128.5 billion at the end of last year, it said.

Shares lost 14p to £12.81, against a wider FTSE 100 that was also lower.

The high-profile battle mounted by Schroders and its chief executive Michael Dobson to stem the flow of City funds from its portfolios has been well chronicled. At the end of last year, the fund manager reported an annual loss of £8 billion of institutional assets but still posted its second highest ever annual profits of £290 million.

In the past 12 months, it has bought a fund of hedge funds, set up new balance funds with hedge fund components and expanded its presence in the US.

Mr Dobson noted that 60 per cent of Schroders profits now come from overseas, where it operates a further 34 offices worldwide.

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