Global Emerging Markets Equity
The objective of the Schroder Emerging Markets Equity strategy is to provide capital growth primarily through investment in equity and equity-related securities of emerging markets companies.
The Schroder Emerging Markets Equity strategy aims to provide capital growth in excess of the MSCI Emerging Markets (Net TR) Index after fees have been deducted over a three to five year period.
The Schroder Global Emerging Markets Equity strategy is a core balanced strategy that provides diversified, style agnostic exposure to a range of developing countries around the world.
Schroders takes a team-based approach to the management of all emerging market equity portfolios. The fund managers are based in London, with stock analysts located in regional offices around the world.
We believe that emerging stock markets are inefficient and provide strong potential for adding value through active fund management. This value can be extracted through both country and stock selection. We believe that it is inappropriate to apply a systematic style bias across so many countries at such different stages of development. We believe that as fund managers we should manage both return and risk. Our aim is to achieve returns with the minimum level of risk through a proactive approach to risk control. We believe that applying a systematic, disciplined approach, with a strong team culture increases our ability to add value.
Schroders has a balanced approach to investing in global emerging market equities, using a mix of top-down country analysis and bottom-up stock selection. Over the long term, we aim to derive 50% of our added value from country allocation, guided by our proven proprietary quantitative model with judgemental overlay, and 50% from stock selection, driven by in-depth fundamental research.
Our investment process begins with the gathering and analysis of information on both countries and stocks. That information is then used to decide allocations for the portfolio. Country allocation discussions are guided by a proprietary quantitative model, while fundamental research forms the basis of the stock selection process. We have the resources to follow a large number of companies within our universe. It is this breadth of coverage, coupled with the local nature of our research, that provides the means of generating unique investment ideas at the stock level.
Our investment process is summarized in the diagram below.
Source: Schroders, for illustrative purposes only.
Our key differentiating features in the management of global emerging markets equities are:
- Disciplined process: Over the long term we aim to derive roughly half our added value from country allocation and half from stock selection, using a proprietary quantitative model to guide country decisions and in-house fundamental research to determine stock positions.
- Rigorous risk management: We follow a rigorous and proactive approach to risk management and risk guidelines are in place at the stock, country and sector levels. Our risk controls are monitored continuously on several levels.
- Experienced team: we benefit from an extensive emerging market equities team with fund management centralized in London and stock analysts located in regional offices around the world. Importantly, we use a “matrix” approach to ensure clients get input from all members of the team.
- Global resources: The team is supported by Schroders’ central resources, including the Economics team, Data Insights Unit and Sustainable Investment team, as well as global platforms for dealing, settlement, risk, research and performance.