Schroder Australian Equity Fund

To outperform the S&P/ASX 200 Accumulation Index by 2-3% (before fees) over the medium to long term by investing in a broad range of companies from Australia and New Zealand.

• Market risk: includes the risk of volatility and negative returns arising from investment markets.
• Equities risk: includes the risk that changes in share prices will negatively impact on the value of investments.
• Company risk: includes the risk of adverse changes to a company or its business environment.
• Fund risk: includes the risk of changes to the investment team, fees and costs and the termination of a fund.

For a comprehensive list of risks please refer to the PDS.

^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.

Schroders is a bottom-up, fundamental, active manager of Australian Equities, with an emphasis on stocks that are able to grow shareholder value in the long term. The investment process focuses on the long-term quality of the business and the average returns achieved through a full business cycle, not the near term earnings momentum. This long term focus normally results in a relatively low momentum bias in either direction as the process is largely ambivalent to short term earnings direction.

The Portfolio seeks to provide economically diversified exposure to a range of listed businesses in Australia/New Zealand. We constrain the investment universe to Australia/New Zealand for two major reasons. Firstly, constraining to a manageable number of companies across a familiar jurisdiction, allows us to know the businesses in which we invest well. Expertise necessarily narrows with breadth. Secondly, selecting the best available opportunities implies a knowledge of how they compare to others available. The only way we can definitively claim to have identified the best available opportunities is to cover the pre-determined universe in its entirety.

The Portfolios is structured on a relatively diversified basis rather than unduly concentrating. This is a necessarily subjective choice. We believe in structuring a portfolio which favours longer holding periods (lower portfolio turnover and better tax efficiency) and provides resilience against variability in macroeconomic conditions. Interest rates, inflation, indebtedness, government policy and a range of other variables impact businesses differently and are inherently difficult to forecast. Diversification across businesses with differing economic exposures offers protection against this variability.

The investment process is a combination of qualitative industry and company competitive position analysis and quantitative financial forecasts and valuations as follows:

Step 1: Stock filtering and coverage

We maintain direct coverage on all stocks within the S&P/ASX 300 Index, as well as a significant number of eligible stocks within our universe that are not included in this index.

Step 2: Financial modelling

Companies are subject to detailed financial analysis using a standardised proprietary company financial model. The model consists of a detailed profit & loss statement, cash flow statement, balance sheet and forecast assumptions. Analysts also have the flexibility to add additional information they believe pertinent to any company. External meetings form an important part of the company assessment.

Step 3: Industry and business quality assessment

An assessment of current and future key industry drivers, the level of industry returns and company specific reasons for relative success within an industry is quantified into financial forecasts, of sustainable margins and returns.

Step 4: Detailed company valuation

Companies within the investment universe are subject to a standardised ‘sum of the parts’ valuation methodology where financial statements are forecast forward three years to reach a mid-cycle or sustainable level of earnings, margins and returns. This determination of the mid-cycle or sustainable level is a function of the industry and business quality assessment.

Step 5: Business and financial risk assessment

We assess the sensitivity of a company’s cash flow to key macro factors such as interest rates together with the impact of financial leverage and capture this information in our database. We believe that these factors are a key risk consideration when constructing a portfolio as opposed to only looking at returns based volatility measures (i.e. tracking error).

Step 6: Portfolio construction

Portfolio construction aims to maximise risk adjusted expected returns, whilst maintaining diversification and skewing the portfolio to high quality companies. Analysts take an active role in the consideration of portfolio inclusions, exclusions and relative weights with final positions the responsibility of the Portfolio Construction Committee.

• Annual Report
• Fund Performance Report
• Fund Proxy Voting
• Interim Report
• Product Disclosure Statement
• Target Market Determination