Schroder Equity Opportunity Fund
The Schroder Equity Opportunities Fund provides exposure to a range of quality stocks, listed in Australia/New Zealand. These companies are characterised by strong returns on capital and a sustainable business franchise offering pricing power and control over business direction.
The key differentiating feature of the strategy is that benchmark weightings are not considered during the portfolio construction process while the stock selection methodology has no size constraints, using the full universe of opportunities.
Stocks are identified using bottom-up, fundamental analysis undertaken by Schroders’ experienced and stable team of in-house analysts, drawing on both local and global research capabilities, with securities selected on the basis of business quality and valuation attraction. With a long term focus on investing it is suitable as a core portfolio holding over a time frame greater than 5 years.
To outperform the S&P/ASX 300 Accumulation Index by 3-5% before fees over the long term by investing in a broad range of companies from Australia and New Zealand.
|Focus on quality||Companies with a sustainable competitive advantage are typically rewarded with superior returns in the long term.|
|‘All Cap’ Strategy No benchmark constrains||Active exposure to all capitalisation segments of the market (including mid, small and micro), not simply the large cap bias inherent in an index-aware approach. High resultant active share.|
|Resourced to fully cover the universe||Schroders has over 50 years’ experience investing in Australian equities and is well resourced and highly experienced with 14 investment professionals having an average of 16 years’ experience*.|
|Strong commitment to equity research||Increasing globalisation of industries and markets means global research capabilities are vital when it comes to effective analysis of Australian equity investments.
Schroders’ local research team in Australia is complemented with detailed research and insights from its extensive global network comprising more than 480 fund managers and research professionals located in offices in 27 countries around the world*.
|Active Management||Analyst research organised along sectoral lines with each analyst covering stocks through the capitalisation spectrum.|
*As at 30 September 2015
- Market risk: includes the risk of volatility and negative returns arising from investment markets.
- Equities risk: includes the risk that changes in share prices will negatively impact on the value of investments.
- Company risk: includes the risk of adverse changes to a company or its business environment.
- Fund risk: includes the risk of changes to the investment team, fees and costs and the termination of a fund.
For a comprehensive list of risks please refer to the PDS.
|Fund Inception date||14 December 2007|
|Valuation||Every business day|
|Minimum investment||Wholesale class - $20,000
Professional class not available
|Buy/sell spread^||0.30% on application; 0.30% on redemption|
|Management costs (ICR)||Wholesale class - 0.92% p.a.
Professional class not available
|Performance fee||Plus a performance fee of 15.4% p.a. of gross out performance above 2% p.a. (as calculated daily) over the S&P/ASX 300 Accumulation Index|
|Distributions||Usually last business day of June and December|
|mFund code||SCH22 (only wholesale class available)|
^Subject to change. Refer to the Buy/Sell spreads page in the Fund Centre
HOW THE FUND IS MANAGED
The investment process is a combination of qualitative industry and company competitive position analysis and quantitative financial forecasts and valuations as follows:
Step 1: Stock filtering and coverage
We maintain direct coverage on all stocks within the S&P/ASX 300 Index, as well as a significant number of eligible stocks within our universe that are not included in this index.
Step 2: Financial modelling
Companies are subject to detailed financial analysis using a standardised proprietary company financial model. The model consists of a detailed profit & loss statement, cash flow statement, balance sheet and forecast assumptions. Analysts also have the flexibility to add additional information they believe pertinent to any company. External meetings form an important part of the company assessment.
Step 3: Industry and business quality assessment
An assessment of current and future key industry drivers, the level of industry returns and company specific reasons for relative success within an industry is quantified into financial forecasts, of sustainable margins and returns.
Step 4: Detailed company valuation
Companies within the investment universe are subject to a standardised ‘sum of the parts’ valuation methodology where financial statements are forecast forward three years to reach a mid-cycle or sustainable level of earnings, margins and returns. This determination of the mid-cycle or sustainable level is a function of the industry and business quality assessment.
Step 5: Business and financial risk assessment
We assess the sensitivity of a company’s cash flow to key macro factors such as interest rates together with the impact of financial leverage and capture this information in our database. We believe that these factors are a key risk consideration when constructing a portfolio as opposed to only looking at returns based volatility measures (i.e. tracking error).
Step 6: Portfolio construction
Portfolio construction aims to maximise risk adjusted expected returns, whilst maintaining diversification and skewing the portfolio to high quality companies. Analysts take an active role in the consideration of portfolio inclusions, exclusions and relative weights with final positions the responsibility of the Portfolio Construction Committee.