Schroder Fixed Income Fund
The Schroder Fixed Income Fund is an actively managed, low volatility strategy that invests in a range of domestic and international fixed income assets with the objective of outperforming the Bloomberg AusBond Composite 0+Yr Index1, whilst delivering stable absolute returns over time. It adopts a Core-Plus investment approach whereby a core portfolio comprised of Australian investment grade bonds is complemented by investments in a diverse range of global and domestic fixed income securities. Investments within the portfolio are actively managed in an attempt to ensure we are in the right assets at the right time to maximise returns while maintaining a low risk profile. The targeted result is a defensive strategy which is broadly diversified with low correlation to equity markets.
1Benchmark previously known as UBS Composite Bond Index.
This product is likely to be appropriate for a consumer seeking capital preservation and income for a small or core component of their portfolio, with a medium to high risk and return profile. This product is unlikely to be suitable for a consumer seeking capital growth or someone seeking high returns.
To outperform the Bloomberg AusBond Composite 0+Yr Index by 1.0% - 1.5% before fees over the medium term.
|Defensive strategy offering diversification benefits||
|Proven investment approach||
|Resourced to fully cover the universe||
|Strong industry endorsement||
- Market risk: includes the risk of volatility and negative returns arising from investment markets.
- Interest rate/duration risk: The performance of fixed interest and debt securities will be sensitive to movements in domestic and international interest rates (e.g. increases in interest rates result in the capital value of fixed interest investments falling).
- Credit risk: Credit risk arises when an issuing entity defaults, which results in a loss of capital to the Fund.
- Company risk: includes the risk of adverse changes to a company or its business environment.
For a comprehensive list of risks please refer to the PDS.
|Fund inception date||30 September 2002|
|Valuation||Every business day|
|Minimum investment||Wholesale class - $20,000
Professional class - $500,000
|Buy/sell spread^||0.12% on application; 0.12% on redemption|
|Management fees and costs*||
Wholesale class - 0.45% p.a.
|Distributions||Normally last business day of March, June, September and December|
|APIR code||Wholesale class - SCH0028AU
Professional class - SCH0016AU
|mFund code||SCH51 (only wholesale class available)|
^Subject to change. Refer to the Buy/Sell spreads page in the Fund Centre
*Additional fees and costs may apply. Please refer to the product disclosure statement for further details.
How the Fund is managed
We believe the fixed income universe is extremely diverse – it can be broadly classified into four key asset classes, namely sovereign, investment grade credit, sub-investment grade credit and cash, each with its underlying sectors. Specifically, we believe the breadth of this universe and the diversity of possible risk and return outcomes not only means active management is essential, but that getting the overall asset allocation right is the single most important determinant of returns over time. That is not to say that security selection is not important – it is vitally important and a significant part of our process - but if the portfolio’s overall asset allocation is wrong, then owning the best securities in the wrong assets will only marginally improve portfolio outcomes.
Furthermore, as most investors require fixed income exposure for income, liability management or to diversify the downside risk in their portfolios from equities, the asset allocation of the portfolio should be set with an eye to delivering a stable, absolute return over time. Consistent with this, we primarily view risk as not meeting this objective, rather than measures of volatility (or tracking error).
The investment process has been designed (and refined over time) to reflect the key ideas described above. In essence it can be segmented into 4 key stages:
The benefit of breaking the process down in this way is to facilitate clear decision making and ensure accountability at every stage, rather than blur the decision making process, particularly in regards to the boundaries between asset allocation and stock selection decisions which can become quite grey in fixed income.
The investment process has been designed to reflect the key ideas described above.
There are 4 key stages:
Stage 1. Asset allocation
In developing the portfolio’s asset allocation, we start from an absolute perspective to construct an initial (or starting point) portfolio, unencumbered by any predetermined benchmark allocations. We combine our medium term expectations of fixed income asset class risk and return with shorter term views on market valuation, cyclical developments and liquidity considerations, matched against the Fund’s objectives to develop appropriate asset allocation of the Fund. By utilising the broadest opportunity set and actively managing these exposures in this part of the process it helps ensure we are in the right assets at the right time which in turn helps us to achieve our broader portfolio goals such as delivering consistent returns with limited tolerance for drawdowns and a requirement for liquidity.
Stage 2. Security selection
Security selection is carried out in a manner aiming to exploit those areas with the most potential for adding value. Independent fundamental credit research and active management at the security level are essential elements of our approach which focuses on the avoidance of default and identifying value in individual securities. As debt investors we are investing our clients’ money in assets with an asymmetric pay-off structure. As such we undertake our own rigorous analysis and form our own independent views rather than rely on external ratings agencies to make this assessment. We will not invest in securities we haven’t researched.
Stage 3. Risk management
A key element of risk management is to ensure risk is being taken in the right places and that an appropriate level of risk is held in the portfolio. We monitor a broad array of risk measures including examining those exposures and factors contributing to risk and the size of their risk contributions, which will influence decisions relating to asset allocation, sector and security selection and their respective position sizing.
Stage 4. Implementation
In the last step of the process our aim is to find the best ways to implement the investment decisions generated.
- Wholesale Class Fund Performance Report
- Professional Class Fund Performance Report
- Annual Report
- Fund Summary
- Product Disclosure Statement (Wholesale Class)
- Product Disclosure Statement (Professional Class)
- Target Market Determination (Wholesale Class)
- Target Market Determination (Professional Class)