QEP Global Core
The QEP Global Core strategy seeks to produce a long run return of +1% per annum (gross of fees) above the MSCI World index or comparable global benchmarks, measured over a full market cycle.
Schroder QEP Global Core is an actively-managed strategy designed to deliver modest incremental outperformance of MSCI World with limited index-relative risk. The team analyzes a global universe of over 15,000 companies to identify attractive opportunities, applying index-relative constraints at the stock, sector and regional level in order to ensure effective diversification, to manage risk and to avoid any extreme outcomes. We would suggest that this strategy offers investors the benefits of index-based investing from a risk and cost perspective with the advantage of relative performance upside.
Stock selection for this strategy is grounded in the analysis of company fundamentals indicating value and business quality, and portfolios will typically exhibit a mild style bias towards both of these factors. The advantage of investing in both Value and Quality is that, while both tend to outperform over time, they deliver their returns at different stages of the economic cycle, creating the potential for outperformance across a broad range of market environments. We also monitor the exposure of portfolios to other metrics, including Momentum and ‘Glamour’, in order to guard against any undue influence on returns from these sources.
We believe that intelligent portfolio construction can greatly enhance the ability to generate repeatable long-run returns. The success of our approach depends on the efficient and consistent identification of stocks with our required characteristics, combined with the careful management of sector, region and beta risks in order to reduce top-down influences which are inherently difficult to forecast.
The QEP team have been managing global equity portfolios since 2000. They use an investment philosophy that is based upon combining fundamental data and well-researched behavioral insights, placing considerable emphasis on portfolio construction and genuine diversification of risk.
There are three components to the QEP team’s investment philosophy:
- All stock selection is focused on two key fundamental drivers of long-run equity returns: stock valuations and business quality (as defined by measures of Profitability, Stability, Financial Strength, and Governance).
- We then use quantitative models to ‘scale up’ our process, which allows us to access the best opportunities across a broad global universe. These models enable us to maximize the opportunity set and re-balance portfolios in a disciplined way as opportunities evolve.
- Finally, experienced investors are responsible for implementing every trade decision, ensuring proper diversification and identifying future risks and return opportunities.
The investment process of the QEP Global Core strategy can be summarized in three stages:
Source: Schroders. 1 Internal guidelines only and are subject to change.
- Core approach– offering the discipline of index investing with the potential for outperformance across most major market environments.
- A fundamental basis– stock selection is driven primarily by value and quality considerations.
- Robust and differentiated investment process– using an innovative “decision-tree based” process based on how investors actually think rather than on traditional quantitative models fitted to past data.
- Sophisticated approach to risk– management of sector, style, stock and market direction risk fully integrated into the investment process.
- Low cost– active management at fee levels competitive with passive investing.
- Separate Accounts