Schroder QEP Emerging Markets Fund
The Schroder Emerging Markets Sustainable Fund offers exposure to emerging market equities through investing in stocks on the basis of both attractive valuations and business quality. The advantage of combining Value and Quality opportunities in a single portfolio is that while both strategies tend to outperform, through time they tend to deliver investment returns at different stages of the economic cycle, offering investors the potential for outperformance across a broad range of market environments.
To outperform the MSCI Emerging Markets (Net Dividends Reinvested) Index over the long term before fees.
The benefits of investing in the Fund include:
- The advantages of both Value and Quality in one fund - While both strategies tend to outperform, through time they tend to deliver their returns at different stages of the economic cycle, offering investors the potential for outperformance across a broad range of market environments.
- High conviction and diversification – A highly diversified portfolio, typically invested in excess of 300 stocks. This high level of diversification reduces stock-specific risk without sacrificing conviction.
- Globally unconstrained, all cap portfolio – We maximise the opportunity set by looking beyond the index to an investment universe of more than 4,000 stocks.
- Country risk monitored via a proprietary model – Portfolio managers monitor country risk using a proprietary top-down model which enables the portfolio managers to understand, monitor and, where necessary, mitigate risk.
- Dedicated and well resourced QEP investment team with clear ownership and accountability for meeting the investment objective of the Fund.
It is important to understand the risks associated with investing in the Fund. Schroders actively re-assesses and manages risk at every stage of the investment process. The main risks specifically with investing in this strategy are market risk, equities risk, emerging markets risk, derivatives risk and risks associated with international investing such as movements in exchange rates.
Emerging Markets can be subject to significantly greater price volatility, substantially less liquidity, smaller market capitalisation, more government intervention in the economy, higher rates of inflation, less government supervision and a higher degree of political uncertainty.
For further details about the risks of investing in this strategy please refer to the Fund offer document.
|Fund Inception date||21 January 2014|
Wholesale class - $20,000
|Buy/sell spread^||0.30% on application; 0.30% on redemption|
|Entry Exit fees||Nil|
|Management costs (ICR)||Wholesale class - 1.40% p.a.
Professional class not available
|Distributions||Normally the last business day of June and December|
|APIR code||Wholesale class - SCH0097AU|
^Subject to change. Refer to the Buy/Sell spreads page in the Fund Centre
How the fund is managed
The investment process for the QEP Emerging Markets strategy can be summarized in three stages:
Stage 1: Value and Quality Ranks
We analyse an investment universe of 4,000 companies across more than 20 emerging markets. Each company is ranked by value (determined across a wide range of metrics including measures of dividends, cash flow, earnings, sales and assets) and Quality (based on measures of profitability, stability and financial strength). These ranks are re-calculated on a daily basis in order to ensure that the latest information is incorporated e.g. price movements and company fundamentals. In addition, financial companies are evaluated using a range of specific metrics to measure leverage, liquidity and funding risk.
Stage 2. Stock selection
Decisions on stock selection are based on a company’s position within the Global Value and Global Quality Ranks. We select stocks from either the top third of our Value Rank or the top third of our Quality Rank, focusing on stocks with a favourable combination of both Value and Quality.
Stage 3: Portfolio Construction
A disciplined and sophisticated approach to portfolio construction is one of the team's most significant competitive advantages. Constructing a portfolio which efficiently balances risks with rewards is the key responsibility of our fund managers who ensure effective diversification across sectors, countries, market capitalisation and other investment themes such as macro-economic risk. Stock specific risk is minimised by investing the portfolio across a minimum of 300 stocks.
While we do not consider country allocation a driver of relative returns, we do recognise that it is important to be mindful of our portfolios’ exposure to areas of increasing risk. This is particularly important within emerging markets where less developed financial systems and more concentrated economic outputs has tended to amplify the sensitivity of individual countries to both internal and external shocks.
Our proprietary country risk model is not designed to be used as a predictor of future returns or to signal an impending crisis. Rather, its outputs are designed to offer a measure of country ‘quality’ and a means of monitoring our overall exposure to areas of mounting risk and adjust positions accordingly.
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.