Find answers to your questions on Schroders and the Real Return (Managed Fund) ASX: GROW here.
Strategy and Fund
What is an objective-based strategy?
Objective-based investing starts with the objective in mind such as GROW’s To achieve a return of CPI¹ plus 4% to 5% p.a. before fees over rolling 3-year periods, rather than an arbitrary benchmark index or a fixed strategic allocation. An objective-based target is generally focused on generating a return above Australian inflation (which is referred to as a ‘real’ return).
Traditional investment theory assumes that over the long term, the more risk you take, the higher your return. This is why the typical ‘balanced’ funds set a fixed long-term asset allocation (say, 60% equities and 40% bonds). While the approach might work over the long term, it can result in short-term capital losses.
Simon Doyle, the Portfolio Manager of the Schroder Real Return (Managed Fund), says: “Over long periods of time, our strategy should deliver something like a traditional balanced fund, just without the variability of returns. GROW (Schroder Real Return [Managed Fund]) would probably underperform equity markets when they are running hot but should certainly do better in a weak environment.”
What should I expect from my investment in the Schroder Real Return (Managed Fund)?
The Schroder Real Return (Managed Fund) is an objective-based strategy that seeks to achieve a return of CPI¹ plus 4% to 5% p.a. before fees over rolling 3-year periods while minimising the incidence and size of negative returns in doing so.
Information about Schroders
Who is Schroder Investment Management Australia Limited?
Schroder Investment Management Australia Limited (‘Schroders’) is a subsidiary of Schroders plc, which is a global company listed on the UK stock exchange that is solely focused on investment management. Schroders began in Australia in 1961 and, since then, has delivered investment products to fulfil investor needs. We launched the Schroder Real Return Fund (previously named the Schroder Real Return CPI Plus 5% Fund) (an unlisted managed fund) in 2008. The Schroder Real Return (Managed Fund) (Ticker: GROW) version followed in 2016 to provide investors access via the ASX to the Schroder Real Return Fund strategy.
Who is the issuer of the PDS?
The issuer of the PDS is Schroder Investment Management Australia Limited (‘Schroders’) in its capacity as the responsible entity and product issuer for the active ETF.
Investing in the fund
What price will I be buying or selling GROW at?
As with any ASX-listed security, the Schroder Real Return (Managed Fund) can be bought or sold at the quoted offer and bid price on the ASX using the ticker GROW.
Schroders, as the market maker for units in the Schroder Real Return (Managed Fund), expects the price to trade within a tight spread around the intraday indicative net asset valuation (Adjusted iNAV). This means that, under normal market conditions, investors would be able to buy or sell units at prices close to the latest value of the underlying assets (Adjusted iNAV) rather than waiting for confirmation of today’s price tomorrow (as occurs with the pricing of unlisted managed funds). The Adjusted iNAV reflects the latest indicative valuation of all the assets held by the Schroder Real Return (Managed Fund) portfolio. These prices are published throughout each trading day on our website.
What is a market maker?
As market maker, Schroders provides a function to ensure there is liquidity in units of Schroder Real Return (Managed Fund) and to ensure that the bid-offer spreads paid by ASX investors are close to the value of the underlying assets or Adjusted iNAV (intraday indicative net asset valuation). This is done through actively issuing and redeeming the Schroder Real Return (Managed Fund) units on issue to closely reflect the requested buy and sell trades occurring on the ASX. The following diagram illustrates the market-making process.
How liquid are units in GROW?
By being quoted on the ASX, units in Schroder Real Return (Managed Fund) are liquid. Settlement occurs under the usual ASX trading rules of T+2. In addition, by being a market maker, Schroders has the obligation to provide liquidity to the ASX market. The active ETF is also invested in listed assets, which means the underlying investments are simple, unlevered and liquid.
Should I expect to receive dividend / income distributions?
Similar to the way shareholders receive dividends from stocks, the Schroder Real Return (Managed Fund)will generally pay distributions on a semi-annual basis. The distributions might include income and realised capital gains of the fund and any additional amounts of cash, income or capital that Schroders determines is appropriate. The distribution investors might receive will be based on the number of units they hold on a cum-entitlement basis (before the units in the Schroder Real Return (Managed Fund) trade ex-entitlement).
Can I reinvest my income distribution?
A unitholder can choose to have distributions reinvested or paid to their nominated bank account. The decision to participate in the ‘distribution reinvestment plan’ (DRP) is optional. Those who decide against this option will automatically default to the cash option. To change your DRP option, please log onto your account through the share registry provided by Link Market Services using the link below:
What is the difference between the way a share pays a dividend and the way the Schroder Real Return (Managed Fund) pays a distribution?
Dividends from companies are generally paid out of the retained earnings and can be franked (if paid out of profits subject to tax in Australia) or unfranked (if no tax has been paid by the company in Australia).
A distribution from the Schroder Real Return (Managed Fund) is the same as receiving a distribution from the unlisted Schroder Real Return Fund. The distribution will generally comprise income components (such as interest and dividends) as well as realised capital gains. In addition, a distribution from the Schroder Real Return (Managed Fund) may include non-cash amounts such as franking credits and foreign tax credits that can be used to offset your tax liability.
Is there a buy-sell spread?
The quoted bid and offer prices on the ASX include an estimate of the execution costs (buy-sell spread) that will be incurred to invest or divest assets in the fund. This ensures all investors are treated fairly with regards to the trading costs arising from the transactions of other investors. The buy-sell spread is our best estimate of the true cost of the transaction and may be influenced by market factors such as volatility and estimated costs to invest or hedge the fund’s exposure.
Importantly, this is not a fee charged by Schroders Australia. The buy-sell spread is retained in the assets of the fund to ensure that investors are not adversely affected by the trading activities of others.
How do I invest? Is there a minimum investment amount?
You can invest in the Schroder Real Return (Managed Fund) through your trading account or by asking your broker to buy units in ticker code GROW. Schroders does not determine a minimum investment size. However, the smallest lot size that can be traded on the ASX is one unit in the Schroder Real Return (Managed Fund). Please always refer to the PDS before making any investment.
How do I withdraw my money from the Schroder Real Return (Managed Fund)?
Units are tradable on the ASX and can be sold via your stockbroker or trading account. Investors do not need to complete a redemption form. Settlement of the sale of units will occur in the same way as the sale of listed securities via the ASX CHESS settlement service on a T+2 cycle.
Can I switch from the Schroder Real Return Fund into the Schroder Real Return (Managed Fund)??
No. As the Schroder Real Return (Managed Fund) is traded on the ASX while the Schroder Real Return Fund is unlisted, you will need to complete the redemption form to redeem from the unlisted fund and then buy units in the active ETF version of the fund.
Can I margin lend into the Schroder Real Return (Managed Fund)?
You should check this with your margin lender or stockbroker where Schroders may already have a relationship.
Comparing GROW to other fund structures
How is the Schroder Real Return (Managed Fund) active ETF different from the unlisted Schroder Real Return Fund, mFund, passive ETFs and listed investment companies (LICs)?
While the investment objective and strategy of the Schroder Real Return (Managed Fund) is the same as that of the unlisted Schroder Real Return Fund, there may be some differences in how the Schroder Real Return (Managed Fund) and the unlisted fund invest in their underlying assets. The manner of how people invest in each vehicle is different.
The Schroder Real Return (Managed Fund) is an active ETF available on the ASX that has live pricing and intra-daily liquidity, whereas the Schroder Real Return Fund is an unlisted managed fund with end-of-day pricing. An investment in the unlisted Schroder Real Return Fund can be made via an application form in a product disclosure statement (PDS) or via the ASX mFund settlement service (code: SCH11) through participating ASX brokers.
LICs are closed-ended companies listed on the ASX and typically manage active investment portfolios. ETFs are open-ended trust structures with third-party market makers managing the issue or cancellation of units. ETFs in Australia are passive portfolios that track an underlying index rather than being managed actively.
Will there be a difference in performance between GROW and the Schroder Real Return Fund?
Both funds should generate similar returns given they adopt the same investment objective and strategy. There might be some differences based on cash flows, how they have invested in underlying assets and administration costs.
How has the Schroder Real Return (Managed Fund) performed?
The Schroder Real Return (Managed Fund) was launched in August 2016 so the active ETF has a limited track record. The unlisted Schroder Real Return Fund began in 2008 and provides evidence of the team’s strong track record in managing a real-return strategy. The performance history of the Schroder Real Return (Managed Fund) and its unlisted counterpart can be found on our website.
Risks and disclosures
What are the risks of investing in the Schroder Real Return (Managed Fund)?
It is important to understand the risks associated with investing in the Schroder Real Return (Managed Fund). The nature of investment markets is such that the return on investment markets, as well as individual investments, can vary significantly and future returns are unpredictable. The risks of (and therefore return on investments) will be influenced by factors including many that are outside the control of Schroders such as fluctuations on domestic and international markets, economic conditions, political climates, interest rates and inflation. For a breakdown of significant risks of an investment in the Schroder Real Return (Managed Fund), please refer to section 4 of the PDS.
What disclosures do you provide?
The disclosures that are available on our website include:
- End-of-day NAV, which is generally published daily
- Adjusted iNAV updated at regular intervals throughout the ASX trading day
- Monthly fund reports
- Quarterly disclosure of the portfolio within two months of the quarter end
- Value of monthly outflows from the fund
- Distribution announcements before each scheduled distribution
What fees do I incur investing in the Schroder Real Return (Managed Fund)?
The fixed-asset based fee Schroders charges for managing the Schroder Real Return (Managed Fund) is 0.75% p.a. inclusive of GST. There is also a buy-sell spread incorporated in the bid-offer prices quoted on the ASX; this is retained by the active ETF to cover the cost of transactions. Individuals may also incur other indirect costs and brokerage costs associated with buying and selling units on the ASX market. There is no performance fee associated with the Schroder Real Return (Managed Fund).
What are the tax implications of investing in the Schroder Real Return (Managed Fund)?
The tax implications are similar to a managed fund offered in Australia. However, Schroders does not purport to offer any taxation advice. Unitholders should obtain independent professional tax advice on the tax implications of their investments in the Schroder Real Return (Managed Fund) that apply to them.
I don’t have a stockbroker. How do I find one?
What is a product disclosure statement (PDS)?
A PDS provides investors with important information about an investment product to ensure they are informed before making a decision to invest. The PDS for the Schroder Real Return (Managed Fund) can be found here here.
How will I stay up to date with my investments?
You will have access to your holding online via the Registrar Link Market Services. You can access daily Net Asset Values (NAVs) and intra-day Adjusted iNAVs (net asset valuations) throughout the ASX trading day.
Schroders provides regular updates and market commentaries that can be found elsewhere on this site.
Who do I contact for more information?
You can contact Link Market Services on 1300 180 103 for all queries regarding your holding in the Schroder Real Return (Managed Fund).
For more information on Schroders or the investment opportunity in the Schroder Real Return (Managed Fund), you should contact your financial advisor or stockbroker.