Schroder Emerging Markets Sustainable Fund
The Schroder Emerging Markets Sustainable Fund offers exposure to emerging market equities through investing in stocks on the basis of attractive valuations, business quality and ESG considerations. The advantage of combining Value and Quality opportunities in a single portfolio is that while both strategies have the potential 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.
This product is likely to be appropriate for a consumer seeking capital growth for a small component of their portfolio, with a high or very high risk and return profile.
This product is unlikely to be suitable for a consumer seeking capital preservation or income. This product is also unlikely to be suitable for consumers seeking a core or standalone solution with a low risk and return profile or a short investment timeframe.
To outperform the MSCI Emerging Markets (Net Dividends Reinvested) Index after fees over the long term.
The benefits of investing in the Fund include:
- The advantages of both Value and Quality in one fund - While both strategies have the potential 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 in order to minimise stock-specific risk without sacrificing overall conviction.
- Access to an unconstrained, all cap portfolio which maximises the opportunity set by looking beyond the index to an investment universe. 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 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.
Emerging Markets can be subject to significantly greater price volatility, substantially less liquidity, smaller market capitalisation, greater political risk, less government supervision and a higher degree of political uncertainty than in developed markets. The key risks include:
- Market risk: includes the risk of volatility and negative returns arising from factors that affect investment markets.
- Equities risk: includes the risk that changes in share prices will negatively impact on the value of investment.
- International investments risk: includes the risk that international political, economic or currency events negatively impact the value of investments.
- Emerging Markets/Frontier Markets risk: includes the risk of significantly higher price volatility, less liquidity and greater political risk in the economy than in developed markets.
- Sustainability risk: that the Fund may have limited exposure to some companies, industries or sectors and may forego certain investment opportunities, or dispose of certain holdings, that do not align with its sustainability criteria applied by Schroders as the investment manager.
The above list of risks is not conclusive. For further details about the risks of investing in this strategy please refer to the Fund offer document.
|Fund Inception date||16 March 2016|
Wholesale class - $20,000
|Buy/sell spread^||0.30% on application; 0.30% on redemption|
|Entry Exit fees||Nil|
|Management fees and costs *||Wholesale class - 0.85% p.a.
Professional class not available
Wholesale and Professional classes: Normally last business day of June and December
Institutional class: Accumulation only
|APIR code||Wholesale class - SCH0097AU|
^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
The investment process for the Emerging Markets Sustainable 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 and assets) and Quality (based on measures of profitability, stability, financial strength and governance). 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 aim for 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 have 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.
Labour standards and environmental, ethical and social considerations
The Fund is managed with reference labour standards, and environmental, social and ethical (ESG) considerations when selecting, retaining and realising the Fund's investments by applying revenue exclusion screens (referred to as Negative Screens) and assessing companies on ESG characteristics. Schroders will then decide whether a company is eligible for inclusion in the Fund, based on this assessment and when determining position sizing within the portfolio.
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 global equity indices for risk management purposes.