Schroder ISF* Global Credit IncomeAn unconstrained approach to a vast global opportunity
What does the fund do?
For income seekers, the global corporate bond opportunity is huge. And, for those concerned about rising interest rates and inflation, credit can provide a better cushion than some of the more interest-rate-sensitive asset classes like government bonds. Schroder ISF Global Credit Income, Schroders’ flagship unconstrained global credit fund invests flexibly across regions and rating categories, aiming to deliver attractive income while also looking to mitigate the risks of capital loss
*Schroder International Selection Fund is referred to as Schroder ISF.
Two rules for getting the most out of global credit
1. Get the unconstrained advantage
We believe unconstrained strategies have more flexibility to take advantage of bottom-up market opportunities across regions and sectors, and they’re better able to avoid behavioural biases and concentration risk. For example, many benchmarked strategies are relatively US-centric, whereas unconstrained strategies are freer to be more “truly global”.
2. Be nimble
Global credit markets are becoming increasingly efficient, so a lot of information is already in the price. But there are still enough information gaps and mis-pricings to offer good hunting for active security selectors. We believe moderately-sized credit strategies are better able than “mega-funds” to access bonds from smaller companies with alpha potential.
We identify broad investment themes that we believe will shape returns ‒ like the end of diesel, income inequality, migration or the rise of e-commerce. Credit analysts across all sectors then try to predict which companies in their coverage are potential winners and losers from these trends. This approach can uncover the less-obvious second- and third-order effects and highlight early-stage opportunities and risks.
Harnessing the “best of Schroders”
There are both top-down and bottom-up elements to the Schroder ISF Global Credit Income strategy. The lead portfolio managers decide the asset allocation among credit sectors and regions. Then, within each sector sleeve, bottom-up credit selection is delegated to Schroders’ investment-grade and high-yield experts on the ground across our global fixed income platform, in both developed and emerging markets.
Experience and scale
With a global platform of 40+ credit analysts, Schroders specializes in intensive bottom-up credit research and security selection. And, with more than 50 years of experience running fixed income portfolios, we have built up a strong track record of making our clients’ money work harder for them ‒ across all phases of the market cycle.
An introduction to Global Credit Income
Fund manager Julien Houdain gives an overview
Find out more about Schroder ISF Global Credit Income
For more information including literature and performance data, visit our fund centre.
“In an environment of high market volatility, managing risk is crucial. This means managers need to focus as closely on managing downside risk as they do on generating steady income.”
Head of Global Unconstrained Fixed Income
Investing in credit with Schroders
In global corporate bond markets, there’s a constant race for information. The winners are those who spot the key trends early and uncover opportunities that are overlooked by their competitors.
What are the risks?
ABS and MBS risk: The strategy may invest in mortgage or asset-backed securities. The underlying borrowers of these securities may not be able to pay back the full amount that they owe, which may result in losses to the strategy.
Contingent convertible bonds: The strategymay invest in contingent convertible bonds. If the financial strength of the issuer of a contingent convertible bond falls in a prescribed way, the value of the bond may fall significantly and, in the worst case, may result in losses to the strategy.
Counterparty risk: The strategy may have contractual agreements with counterparties. If a counterparty is unable to fulfil their obligations, the sum that they owe to the strategy may be lost in part or in whole.
Credit risk: A decline in the financial health of an issuer could cause the value of its bonds to fall or become worthless.
Currency risk: The strategymay lose value as a result of movements in foreign exchange rates.
Derivatives risk: Derivatives may be used to manage the strategyefficiently. The strategymay also materially invest in derivatives including using short selling and leverage techniques with the aim of making a return. A derivative may not perform as expected, may create losses greater than the cost of the derivative and may result in losses to the strategy.
Emerging markets: In general, these markets carry greater political, legal, counterparty, operational and liquidity risk than developed markets.
High yield bond risk: High yield bonds (normally lower rated or unrated) generally carry greater market, credit and liquidity risk.
IBOR: The transition of the financial markets away from the use of interbank offered rates (IBORs) to alternative reference rates may impact the valuation of certain holdings and disrupt liquidity in certain instruments. This may impact the investment performance of the strategy.
Interest rate risk: The strategymay lose value as a direct result of interest rate changes.
Liquidity risk: In difficult market conditions, the strategymay not be able to sell a security for full value or at all. This could affect performance and could cause the strategyto defer or suspend redemptions of its shares.
Market risk: The value of investments can go up and down and an investor may not get back the amount initially invested.
Operational risk: Operational processes, including those related to the safekeeping of assets, may fail. This may result in losses to the strategy.
Performance risk: Investment objectives express an intended result but there is no guarantee that such a result will be achieved. Depending on market conditions and the macro economic environment, investment objectives may become more difficult to achieve.
Sustainability risk: The strategyhas environmental and/or social characteristics. This means it may have limited exposure to some companies, industries or sectors and may forego certain investment opportunities, or dispose of certain holdings, that do not align with its sustainability criteria chosen by the investment manager. The strategymay invest in companies that do not reflect the beliefs and values of any particular investor.
This webpage does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder International Selection Fund (the “Company”). Nothing on this webpage should be construed as advice and is therefore not a recommendation to buy or sell shares. An investment in the Company entails risks, which are fully described in the prospectus.
Subscriptions for shares of the Company can only be made on the basis of its latest Key Information Document and prospectus, together with the latest audited annual report (and subsequent unaudited semi-annual report, if published), copies of which can be obtained, free of charge, from Schroder Investment Management (Europe) S.A. For Luxembourg, these documents may be obtained in English, free of charge, from the following link: www.eifs.lu/schroders.
Schroders may decide to cease the distribution of any fund(s) in any EEA country at any time but we will publish our intention to do so on our website, in line with applicable regulatory requirements.
The fund has the objective of sustainable investment within the meaning of Article 8 of Regulation (EU) 2019/2088 on Sustainability-related Disclosures in the Financial Services Sector (the “SFDR”).
Any reference to sectors/countries/stocks/securities are for illustrative purposes only and not a recommendation to buy or sell any financial instrument/securities or adopt any investment strategy.
Past Performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of investments to fall as well as rise.
Schroders has expressed its own views and opinions in this document and these may change.
A summary of investor rights may be obtained from https://www.schroders.com/en/lu/private-investor/footer/complaints-handling/
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Issued by Schroder Investment Management (Europe) S.A., 5, rue Höhenhof, L-1736 Senningerberg, Luxembourg. Registration No B 37.799.