Holding pattern- When there are fewer attractive assets to buy, value investors buy fewer assets


In one or two recent client meetings, we have been asked why the turnover of stocks being bought and sold in our portfolios has increased of late. Let’s be clear on this – it hasn’t. Taking the Recovery fund as an example, you can see from the table below that portfolio turnover this year is in line with the long-term average of about 20% – an extremely low level in the context of the broader market.

This low average turnover is clear evidence of our genuinely patient approach to investing and of the five-year time horizon we adopt when we buy into businesses. Nevertheless, as you can also see from the table, there are times when portfolio turnover spikes and it does so on opportunity – for example, in the merger and acquisition frenzy of 2005 when a number of our holdings were the targets of bids

Then, in 2008, the portfolio went through its own ‘great rotation’ as we moved out of stocks that had held up quite well against the ravages of the credit crisis and into the then bombed-out bargains of the UK market, such as housebuilders and retailers. Since then, turnover within the portfolio has remained relatively constant though the actual number of holdings has been falling.

Back in 2009, the total was just shy of 70 whereas today it is below 50 – indeed we would expect it to continue to drop for some months yet – and this may well be what is prompting those questions about turnover. However, there is nothing sinister behind the fall – it is simply that, when there are fewer attractive investments out there to make, we make fewer investments.


Here on The Value Perspective, we never look to force a portfolio. If there are lots of businesses we think are worth buying – as was the case in 2008 and 2009 – then we will buy lots of businesses. Equally, if the market opportunity is shrinking, the number of holdings in our portfolio will do likewise.

The sectors/securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy/sell. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Schroders has expressed its own views and opinions in this document and these may change. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations.


Important Information:

The views and opinions displayed are those of Nick Kirrage, Andrew Lyddon, Kevin Murphy, Andrew Williams, Andrew Evans, Simon Adler, Juan Torres Rodriguez, Liam Nunn, Vera German and Roberta Barr, members of the Schroder Global Value Equity Team (the Value Perspective Team), and other independent commentators where stated.

They do not necessarily represent views expressed or reflected in other Schroders' communications, strategies or funds. The Team has expressed its own views and opinions on this website and these may change.

This article is intended to be for information purposes only and it is not intended as promotional material in any respect. Reliance should not be placed on the views and information on the website when taking individual investment and/or strategic decisions. Nothing in this article should be construed as advice. The sectors/securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy/sell.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.