OBJECTIVE BASED APPROACH

a smarter way to invest

The Schroder Real Return Fund aims to smooth your investment journey in four ways.

What is objective-based investing?

Objective-based investing starts with the objective in mind rather than some arbitrary benchmark index or strategic allocation. It is generally focused on generating a return above Australian inflation (which is referred to as a ‘real’ return).

Why diversify?

Given the unpredictability of markets, diversifying your investments is crucial to delivering more reliable returns. Many investor portfolios tend to have high exposures to the same themes, low protection from certain risks and overall little true diversification.

True diversification is a portfolio with a broad range of exposures. As the saying goes: “Don’t put all your eggs in one basket.”

 

For years investors have been taught that the more risk you take on, the greater the potential returns on your investment.

While this is generally true over the very long term, there will always be periods where greater risk will detract from returns – as happens when share markets are falling. This can create significant variations in returns from year to year.

Given the unpredictability of markets, diversifying your investments across shares, corporate debt, bonds, property and cash around the world, is crucial to delivering more reliable returns.

To illustrate this point, we have created the “Multi Asset Sorter” which shows calendar-year returns for the major asset classes available to an Australian investor.

Why the traditional approach of using a fixed strategic-asset allocation is flawed?

At Schroders, we believe there are two significant downsides to using a fixed strategic asset allocation.

   Timing

   Inflexibility

The difference timing can make - an example

Why does the year you were born matter?

 

As a way of introducing the concept of the difference timing can make when investing, let’s consider the hypothetical examples of Ray, Mardi and Chris using historical data.

The only difference is when they were born, or specifically when they started investing. Ray started in 1919, Chris started in 1935 and Mardi began in 1958. The chart shows their average return over 40 years and their multiple of final salary. While Ray and Mardi achieved an average real rate of return close to 6% p.a. Chris’ average return barely broke 2% p.a.

Sequencing risk

This example highlights the impact of ‘sequencing risk’, the term that describes the impact a large negative return can have on superannuation balances as you near retirement. So while Ray and Mardi achieved similar returns over their careers, Mardi retired with a larger nest egg as the sequence of her returns was more favourable because the largest positive returns occurred closer to her retirement when her portfolio balance was large.
The lesson is investors need to be wary of sudden shifts in investment markets that could occur as they near retirement. It shows why it is so important to protect your investments against sudden market falls, as occurred during the Global Financial Crisis.

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*The Adjusted Indicative NAV ("Adjusted iNAV") will be published throughout the ASX Trading Day. The Adjusted iNAV will be updated for price movements of the underlying funds(s) investments through live market prices, foreign currency movements or proxy instruments where possible. Where this is not possible, the last price at which an asset was quoted, will be used. The Adjusted iNAV is indicative only, and may incorporate securities for which there are no live market prices at the time of calculation and so it may not reflect the actual value of the underlying assets of the fund(s). More information on the Adjusted iNAV is available in the fund's Product Discloure Statement. 

*iNAV calculations as shown on https://www.schroders.com/en/au/individuals/funds/grow/ (the “data”) provided by ICE Data Indices, see ICE Terms of Use, and is updated during ASX trading hours. Powered by Factset. iNAV is indicative and for reference purposes only. The Fund is not sponsored, endorsed, sold or marketed by ICE Data Indices, LLC, its affiliates (“ICE Data”) and ICE Data or its respective third party suppliers MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE iNAV, IOPV, FUND OR ANY FUND DATA INCLUDED THEREIN.  IN NO EVENT SHALL ICE DATA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, DIRECT, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. You acknowledge that the data is provided for information only and should not be relied upon for any purpose.

While every care has been taken in the preparation of the information contained within this website, neither Schroder Investment Management Australia Limited, (ABN 22 000 443 274)(AFSL 226473) nor any member of the Schroders Group, make any representation or warranty as to the accuracy or completeness of any information, including without limitation, any forecasts. This content has been prepared for the purpose of providing general information only, without taking account of any particular investor’s objectives, financial situation or needs. Investors should, before making any investment decisions, consider the appropriateness of the information on this website, and seek professional advice, having regard to their objectives, financial situation and needs.