Schroder Global Core Fund
The Schroder Global Recovery Fund applies a disciplined value investment approach, seeking to invest in a select portfolio of securities that are significantly undervalued relative to their long-term earnings potential.
The fund invests in companies worldwide that have classic recovery characteristics. Companies trade on low multiples of recovered profits, but where long-term prospects are believed to be good. Its major strength is the disciplined focus on buying out-of-favour companies at all stages in the investment cycle. We seek to consistently apply our approach as whilst a valuation-driven philosophy will not always be in favour, over longer time periods this investment style has generated exceptional returns.
To outperform the MSCI World ex Australia Index (net dividends reinvested) before fees with low index-relative risk across a broad range of market environments.
The benefits of investing in the Fund include:
- Global diversification through a highly diversified portfolio with typically in excess of 500 stocks, which minimises stock-specific risk. Our research suggests that there is a long-term premium available to investors focused on valuations and on business quality. We exploit this through the Fund's broad investment universe of more than 15,000 stocks globally.
- Limited index-relative risk as top-down risks are carefully managed by applying index-relative limits on the weights of regions, sectors and stocks in our portfolio construction process.
- Dedicated and well resourced QEP investment team with clear ownership and accountability for meeting the investment objective of the Fund.
- 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 investment.
- International investments risk: includes the risk that international political, economic or currency events negatively impact the value of investments.
- Emerging Markets/Frontier Markets risk: includes the risk of significantly higher price volatility, less liquidity and more government intervention in the economy than in developed markets.
For a comprehensive list of risks please refer to the PDS.
|Fund Inception date||31 October 2002|
Wholesale class - $25,000
|Buy/sell spread^||0.15% on application and 0.10% on withdrawal|
|Management costs (ICR)||
Wholesale class - 0.40% p.a.
|Distributions||Normally last business day of June and December|
|mFund code||SCH31 (only wholesale class available)|
^Subject to change. Refer to the Buy/Sell spreads page in the Fund Centre
HOW THE FUND IS MANAGED
Our investment process can be summarised in three stages:
Stage 1: Fundamental Drivers – Global Value and Global Quality Ranks
Stock selection is focused on two key fundamental drivers of long-run equity returns: Value and Quality. We begin by ranking a global universe of over 15,000 companies in terms of both their valuations (across range of metrics based on dividends, earnings, cash flow, assets and sales) and business quality (based on measures of profitability, stability and financial strength). Our investment universe includes stocks in the top third of either (or both) of these ranks.
Stage 2: Stock selection
We prioritise stocks with the most favourable combination of both Value and Quality characteristics. We believe that the Quality criterion helps us to avoid ‘value traps’ – stocks which are cheap for good reason. Conversely, our awareness of a stock’s valuation helps us to avoid over-paying for Quality. Individual position sizing is determined by our analysis of a stock’s fundamentals – as well as considerations of liquidity and volatility – subject to index relative weight limits. Typically we will hold overweight positions in attractively valued, high quality stocks and will be underweight (or will not hold) companies which are unattractive on Value and Quality measures. We also monitor other factors such as Momentum and Glamour for risk management and diversification purposes.
Stage 3: Portfolio Construction
Top-down risks are carefully managed with index-relative limits applied at the region, sector and stock level. Within these limits we aim to maximise exposure to stocks with a higher probability of outperformance and avoid or underweight those with a lower probability of outperformance. Portfolio managers assess the portfolio every day and re-balance according to the opportunities available. Portfolio managers are also responsible for controlling the overall risk budget of our funds, ensuring an efficient trade-off between potential risks and rewards. Exceptional diversification is one of our most important tools, maximising exposure to return opportunities across sectors, countries and market capitalisation while minimising stock-specific risk. Portfolio managers ensure that the strategy is sufficiently diversified, typically invested in excess of 500 stocks. Portfolio managers implement every trade decision and, as experienced investors, provide an important overlay in terms of awareness of future opportunities and risks in global markets.
Currency exposure is typically unhedged however currency derivatives may be used with equity index futures in managing cash flows or to manage active currency positions relative to the benchmark for risk management purposes.