Business cycle approach
Revenues well in excess of GDP with a high degree of uncertainty or volatility.
Grow revenues in excess of GDP with low volatility and high visibility.
Grow revenues at or below GDP with low volatility and high visibility.
Revenues depend on interest rate spreads, financial markets and asset valuations.
Revenues reliant on consumer spending.
Revenues linked either directly or indirectly to a commodity product.
Manufacturing capital goods or with revenues linked to industrial production.
The process explained
A clear macro view combined with bottom-up stock selection
The fund manager combines a clear macro view with bottom-up stock selection driven by a thorough analysis of earnings changes, relative to the market. Analysis of the business cycle reduces the risk of stock selection by focusing on the required risk profile of the company.
At turning points in the business cycle, a change in risk appetite requires the portfolio’s beta to change substantially. This is where we add value compared to funds that are run with a 100% bottom-up stock picking approach.
We segment the stock universe into seven style groups; growth, growth defensive, value defensive, financials, consumer cyclicals, commodity cyclicals and industrial cyclicals.
The portfolio will be tilted towards the style groups which are appropriate for the current phase of the business cycle.
We combine our top-down macro view with bottom-up stock selection. In between turning points, we focus on earnings revisions, looking for the best opportunities.
Based on this stock selection process and where we are in the business cycle, the fund manager holds what he believes are the appropriate stocks for that phase.
Meet the managers
Head of Business Cycle
Matt leads the Business Cycle Team at Schroders. He joined the Schroders group as part of the Cazenove acquisition. Prior to Cazenove he worked for AIB Govett Investment Management. Prior to this he was a chartered accountant at PriceWaterhouseCoopers. He graduated from Cambridge University with a degree in History.
Fund Manager, Schroder European Opportunities Fund
Steve is a senior member of the Pan-European Equity team at Schroders, having joined following the acquisition of Cazenove Capital. He was at HSBC Asset Management (Europe) Ltd prior to this. He graduated from Trinity College, Oxford with a First Class (Hons) in Modern Languages. Steve is a member of the Securities Institute and has worked in the industry for over 19 years.
Fund Manager, Schroder European Alpha Income Fund
James is a member of the Cazenove Capital Pan-European Equity team at Schroders. He graduated from St John's College, Cambridge with a degree in Natural Science and is a Chartered Financial Analyst.
The four funds using this distinct approach are:
Source of ratings: Morningstar, Trustnet, Rayner Spencer Mills and Citywire as at 31 January 2016.