Schroder ISF* Global Cities
OPPORTUNITY THAT NEVER SLEEPS. Cities already generate more than 80% of world GDP and the real estate within them consistently outperforms national averages*. With urban migration set to increase, global cities will be the lifeblood of economic growth. Invest for profit with purpose. *Source: IBRD as at 20 April 2020Global Cities are places where people want to live, work and play. Their key characteristics are: strong infrastructure, diverse economies, advanced ESG polices, skilled labour force, and quality of life and culture. Investing in real estate assets within these cities gives exposure to a diverse range of sectors.
*Schroder International Selection Fund is referred to as Schroder ISF.
Urbanisation is a powerful multi-decade theme
It's expected that by 2050, nearly 70% of the world's population (compared to 55% today) will reside in urban areas.
*Source: UN, as at May 2018
So knowing which cities stand to benefit from this demographic shift means investors can target the right opportunities. Investing in real assets within these cities gives exposure to a diverse range of sectors (from data centres, self-storage and manufactured homes to conventional areas such as offices, retail and industrials) and access to economies that are expected to outperform national averages.
Global Cities also offer a solution to combatting climate change. With two thirds of carbon emissions focused on cities, the transition to net zero carbon and achieving the goals set out in The Paris Agreement would require changes to first be made in these cities that are backed by sustainability policies. A clear example of the impact cities can make is seen from C40, a network of the world’s megacities that are committed to addressing climate change.
These cities’ foundations lie in superior sustainability policies, strong infrastructure, diverse economies, skilled labour and a high quality of life. They attract the best talent worldwide, who contribute to continuing economic growth.
"Global Cities are those which capture the world's attention and investment, they are international hubs for individuals and businesses. It is in these cities you will find world-class universities and enterprises - with governments working hard to ensure they continue to thrive."
Schroder Global Cities Real Estate
Portfolio managers
Global Listed Real Assets
Analysts
Global Real Estate Securities, Global Listed Real Assets
Fitch Ratings Excellent (as at 16 June 2021)
Square Mile Investment Consulting and Research - Responsible A
Febelfin Towards Sustainability
During 2021 the Global Cities fund was subject to sustainability assessments from various parties. This analysis provides evidence of the rigour and extensive focus we apply in this crucial area.
In April the fund was awarded the Belgium Febelfin Towards Sustainability accreditation which signifies that it adheres to the highest quality standards for sustainable and socially responsible financial products.
In October the fund received a ‘Responsible A rating’ from Square Mile Investment Consulting and Research. The report stated that “ESG considerations are deeply embedded throughout the investment process, with the managers seeking to invest in sustainable real assets that enable society to meet its present needs without compromising the ability of future generations to meet theirs”.
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Risk Considerations
- Capital risk/distribution policy: As the fund intends to pay dividends regardless of its performance, a dividend may represent a return of part of the amount you invested.
- Counterparty risk: The fund may have contractual agreements with counterparties. If a counterparty is unable to fulfil their obligations, the sum that they owe to the fund may be lost in part or in whole.
- Currency risk: The fund may lose value as a result of movements in foreign exchange rates, otherwise known as currency rates.
- Emerging markets and frontier risk: Emerging markets and especially frontier markets, generally carry greater political, legal, counterparty, operational and liquidity risk than developed markets.
- Currency risk/hedged share class: The hedging of the share class may not be fully effective and residual currency exposure may remain. The cost associated with hedging may impact performance and potential gains may be more limited than for unhedged share classes.
- Derivatives risk: Derivatives, which are financial instruments deriving their value from an underlying asset, may be used to manage the portfolio efficiently. A derivative may not perform as expected, may create losses greater than the cost of the derivative and may result in losses to the fund.
- Distribution Costs: The level of distribution costs in certain jurisdictions may impact the ability of the investment manager to meet the fund’s investment objective across all share classes after fees have been deducted.
- Liquidity risk: In difficult market conditions, the fund may not be able to sell a security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares, meaning investors may not be able to have immediate access to their holdings.
- Operational risk: Operational processes, including those related to the safekeeping of assets, may fail. This may result in losses to the fund.
- 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.
- Real estate and property risk: Real estate investments are subject to a variety of risk conditions such as economic conditions, changes in laws (e.g. environmental and zoning) and other influences on the market.
- Sustainability risk: The fund has the objective of sustainable investment. 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 fund may invest in companies that do not reflect the beliefs and values of any particular investor.
- Market risk: The value of investments can go up and down and an investor may not get back the amount initially invested.