Schroder Global Alpha Plus
Strategy Fact Sheet – 1Q16
Strategy overview
Team highlights
Schroders’ Global Alpha Plus strategy offers a concentrated,
fundamental research-driven approach aimed at delivering strong
outperformance. Our style is to seek companies with a ‘growth
gap’ – where our expectations of forward earnings growth will
exceed that of the markets’. We focus on what we believe to
be only the very best investment ideas that are identified by
Schroders’ team of locally based Equity Analysts and our Global
and International Equities Team of Portfolio Managers and Global
Sector Specialists.
– Team manages approximately $18 billion in Global and EAFE
assets
– Experienced dedicated team of 13 investment professionals
based in London
– Global sector specialists pull our best ideas from around the world
– Utilizing more than 70 locally based research analysts in 11
countries
– Globally integrated research platform
Key features
– Concentrated, best ideas portfolio of global stocks
– Focus on identifying companies which can deliver a positive earnings surprise or “growth gap”
– Effective, bottom-up investment process
– Well-resourced, highly experienced team incorporating global sector expertise and local knowledge
– Robust, multi-layered approach to risk - fundamental risk scoring utilized to analyze multiple sources of stock risk
Composite performance
As of March 31, 2016
*Inception May 31, 2010
20%
Schroder Global Equity Alpha Plus - Best Ideas Composite (Gross)
Schroder Global Equity Alpha Plus - Best Ideas Composite (Net)
MSCI AC World Index†
15%
†
The MSCI ACWI
captures large and mid cap
representation across 23
Developed Markets and 23
Emerging Markets countries.
With 2,480 constituents, the
index covers approximately
85% of the global investable
equity oppportunity set.
10%
8.67
9.55
7.06
7.93
5.53
5%
0.24
0%
-5%
-2.45 -2.81
-10%
5.97
8.66
4.41 5.22
0.24
-2.45 -2.81
-1.24
-2.71
-4.34
QTD
YTD
1 yr
3 yr
5 yr
Annual S.I.*
Difference (Gross)
-2.69%
-2.69%
+3.09%
+3.13%
+0.75%
+0.89%
Difference (Net)
-3.05%
-3.05%
+1.63%
+1.52%
-0.82%
-0.73%
2015
2014
2013
2012
2011
Gross
5.99%
2.37%
31.24%
13.37%
-12.08%
Net
4.43%
0.85%
29.30%
11.69%
-13.38%
MSCI AC World Index
-2.36%
4.16%
22.80%
16.13%
-7.35%
Difference (Gross)
+8.36%
-2.28%
+4.58%
-3.12%
-6.53%
Difference (Net)
+6.79%
-3.31%
+6.50%
-4.44%
-6.03%
Past performance is not a guide to future performance. The value of an investment can go down as well as up and is not guaranteed. Please refer to the disclosures at the end of
the document for important information about the composite, including the definition of the Benchmark. Performance for periods greater than 1 year is annualized. Please see the
disclosures at the end of this document for more details about the composite creation date.
All data and statistics as of March 31, 2016.
Schroder Global Alpha Plus
Sector allocation (%)
Regional allocation (%)
22.2
20.3
21.2
Financials
Information Technology
15.1
14.5
12.9
11.8
11.8
11.5
10.5
Consumer Discretionary
Health Care
Industrials
5.1
North America
6.9
Japan
8.8
10.7
Continental
Europe
5.9
6.4
Energy
3.0
4.0
Telecommunication Svcs
Materials
Emerging Markets
Cash 2.4
7.6
Consumer Staples
Utilities
Pacific ex Japan
0.0
Schroder Global Equity
Alpha Plus
3.5
0.0
11.4
United Kingdom
MSCI World Index
4.8
56.1
9.4
2.4
Cash 0.0
0
5
15
20
25
30
Source: Schroders, MSCI as of March 31, 2016.
Source: Schroders, MSCI as of March 31, 2016.
Sectors/Regions listed are shown for illustrative purposes and are not to be considered a recommendation to buy or sell.
Portfolio & risk statistics
Schroder Global Equity Alpha Plus
MSCI AC World Index
Number of holdings
Weighted average market cap ($ billions)1
2
EPS Growth (3 year)
3
Price to earnings ratio (trailing 12 months)
4
Price to earnings ratio (forward 12 month)
Price to book (trailing 12 months)5
6
Tracking error (5 years)
7
Beta (5 years)
30
2,473
142.25
92.55
11.47
9.60
17.39
16.76
15.00
15.46
2.03
1.95
4.23
–
1.07
–
Source: Schroders, MSCI as of March 31, 2016.
1. An average that takes into account the proportional relevance of each component, rather than treating each component equally. Market cap is the market price of an entire
company on any given day, calculated by multiplying the number of shares outstanding by the price per share. 2. The portion of a company’s profit allocated to each outstanding
share of common stock. Earnings per share serves as an indicator of a company’s profitability. 3. Market price per share divided by annual earnings per share for the most recent
12 month period. 4. Market price per share divided by annual earnings per share divided by annual earnings per share using the estimated net earnings over the next 12 months.
5. A ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share.
6. The difference between a portfolio’s returns and the benchmark. 7. A mathematical measure of the sensitivity of rates of return on a portfolio compared with rates of return on
the market as a whole. A beta of 1.0 indicates that an asset closely follows the market; a beta greater than 1.0 indicates greater volatility than the market.
Top ten holdings
Sector
Country % of Total Market Value
1. Alphabet Inc.
Information Technology
United States
6.15
2. SAP SE
Information Technology
Germany
4.75
3. Danaher Corporation
Industrials
United States
4.57
4. Comcast Corporation
Consumer Discretionary
United States
4.57
5. UnitedHealth Group Incorporated
6. Reckitt Benckiser Group plc
7. Toronto-Dominion Bank
Health Care
United States
4.43
Consumer Staples
United Kingdom
4.30
4.29
Financials
Canada
8. Apple Inc.
Information Technology
United States
4.03
9. Taiwan Semiconductor Manufacturing Co., Ltd.
Information Technology
Taiwan
3.79
Health Care
United States
10. Amgen Inc.
Total
Source: Schroders, as of March 31, 2016.
Securities listed are shown for illustrative purposes and are not to be considered a recommendation to buy or sell.
3.79
44.66
Schroder Global Alpha Plus
Quarterly Commentary
Market Review
The first quarter of 2016 was a tale of two halves, characterized
by significant volatility. At the start of the year, instability in the
Chinese equity market and concerns about global growth,
currency dislocations and a much-anticipated rise in US interest
rates, prompted some dramatic equity market declines in January
and early February. Investors have also been worried about the
effectiveness of monetary policy in many countries and this has
added further to the sense of uncertainty prevalent in markets so far
this year.
The middle of February marked an inflection point however, and
equity markets have since recovered some of their poise, as
a confluence of interrelated factors triggered a shift in market
sentiment. These included an unwinding of dollar strength and
the introduction of a variety of pro-growth policy measures by the
Chinese authorities, which combined to relieve some of the pressure
on commodities and emerging markets. As concerns about the
global outlook began to ease somewhat, investors rotated into
the underperforming areas of the market, spurring a rally in value
sectors.
Performance and Strategy
The Global Equity Alpha Plus strategy underperformed the
benchmark over the quarter. The growth bias of the portfolio and the
sharp market rally driven by lower quality, cyclical names towards
quarter-end, each had a significant bearing on relative performance.
Stock selection in the US, where the market shift was most
prominent, was particularly unfavorable. Notably, contributors to the
underperformance were broadly based, reflecting the style rotation
within the market that was the root cause of the underperformance,
rather than the negative impact of any one particular name within
the portfolio
By sector, we suffered the most in industrials and telecoms. In the
latter, an Indian mobile operator weighed the most on returns. We
have sold out of its holding as increased competition and a more
rapid adoption of 4G will force the company to enter a new cycle of
CAPEX and spectrum investment. In industrials, concerns around
the impact of a stronger Japanese yen on the earnings power of
exporters had a negative effect on a tractor manufacturer in the
quarter. Currency headwinds will put some pressure on margins,
but we believe the stronger driver in the medium term will be the
structural growth that comes from the increased mechanization of
agriculture in Asia, for which the company is well positioned.
We also suffered in the financials sector, where our holdings
were negatively affected by a combination of concerns about the
banking sectors exposure to the energy sector and the impact of
interest rates staying “lower for longer” (or even negative) in major
economies. We do not believe that any of our bank holdings have
high or problematic exposure to the energy and commodities sector.
On the positive side, our holding in a chip manufacturer was the top
contributor. The market has rewarded the company for its ability to
demonstrate strong operating and financial performance and for
management’s capacity to generate organic growth and cashflow
conversion in an uncertain market environment.
Outlook
Given a backdrop of sub-par global economic growth, ongoing
downward revisions to earnings expectations and equity valuations
that, in aggregate, appear full, instability in equity markets can be
expected to remain a key feature over the next few months.
Increasing cyclical exposure
That said, monetary policy remains accommodative and there are
signs that global fiscal policy may be becoming more expansive. In
addition, there are tentative indications that the industrial inventory
cycle, particularly in the US, is beginning to inflect. In anticipation,
we are gradually increasing exposure to more cyclical areas of the
market, where we believe genuine opportunities exist in sectors that
have been out of favor for much of the past 18 months, such as
industrials, energy and some materials.
In addition to the increased focus on unloved areas of the market
where there is significant earnings recovery potential, we continue
to pay particular attention to the disruptors and enablers of new
business models. Our emphasis on the proper evaluation of the
business risk associated with these companies is particularly
relevant as, in many cases, these business models are new and
untested.
Focus on stock selection
Despite a challenging market background, we believe that there are
companies that can deliver growth independent of the economic
cycle and that these will ultimately be rewarded with positive
relative returns. Our efforts remain focused on identifying company
situations where future growth has not been recognized by the
market and in so doing we believe we can benefit from the historical
relationship that has existed between positive earnings surprise and
the strong prospects for share price outperformance.
Source: Schroders
Important Information: Schroders is a global asset management company with $466.9 billion under management as of March 31, 2016. Our clients are major financial institutions
including banks and insurance companies, public and private pension funds, endowments and foundations, high net worth individuals, financial intermediaries and retail investors.
Our aim is to apply our specialist asset management skills in serving the needs of our clients worldwide and in delivering value to our shareholders. With one of the largest
networks of offices of any dedicated asset management company and over 420 portfolio managers and analysts covering the world’s investment markets, we offer our clients
a comprehensive range of products and services. Further information about Schroders can be found at www.schroders.com/us. Portfolio data and risk characteristics based
on a sample account. Details may vary from account to account. This document does not constitute an offer to sell or any solicitation of any offer to buy securities or any other
instrument described in this document. The information and opinions contained in this document have been obtained from sources we consider to be reliable. No responsibility
can be accepted for errors of facts obtained from third parties. Reliance should not be placed on the views and information in the document when taking individual investment and/
or strategic decisions. Schroders has expressed its own views and opinions in this document and these may change. Past performance is not a guide to future performance.
The value of investments can go down as well as up and is not guaranteed. Sectors/securities illustrate examples of types of sectors/securities in which the strategy invested
and may not be representative of the strategy’s current or future investments. Portfolio sectors/securities and allocations are subject to change at any time and should not be
viewed as a recommendation to buy/sell. The opinions stated in this document include some forecasted views. We believe that we are basing our expectations and beliefs
on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee that any forecasts or opinions will be realized. Schroder Investment
Management North America Inc. is an indirect wholly owned subsidiary of Schroders plc and is a SEC registered investment adviser and registered in Canada in the capacity
of Portfolio Manager with the Securities Commission in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec, and Saskatchewan providing asset management
products and services to clients in Canada. This document does not purport to provide investment advice and the information contained in this newsletter is for informational
purposes and not to engage in a trading activities. It does not purport to describe the business or affairs of any issuer and is not being provided for delivery to or review by any
prospective purchaser so as to assist the prospective purchaser to make an investment decision in respect of securities being sold in a distribution. Schroder Investment Management
North America Inc. (“SIMNA Inc.”) is an investment advisor registered with the U.S. SEC. It provides asset management products and services to clients in the U.S. and Canada
including Schroder Capital Funds (Delaware), Schroder Series Trust and Schroder Global Series Trust, investment companies registered with the SEC (the “Schroder Funds”.)
Shares of the Schroder Funds are distributed by Schroder Fund Advisors LLC, a member of the FINRA. SIMNA Inc. and Schroder Fund Advisors LLC are indirect, wholly-owned
subsidiaries of Schroders plc, a UK public company with shares listed on the London Stock Exchange. Schroder Investment Management North America Inc., 875 Third Avenue,
New York, NY 10022-6225, (212) 641-3800, www.schroders.com/us.
Schroder Global Alpha Plus
Risk
All investments, domestic and foreign, involve risks including the risk of possible loss of principal. The market value of the portfolio may
decline as a result of a number of factors, including adverse economic and market conditions, prospects of stocks in the portfolio, changing
interest rates, and real or perceived adverse competitive industry conditions. Investing overseas involves special risks including among
others, risks related to political or economic instability, foreign currency (such as exchange, valuation, and fluctuation) risk, market entry or
exit restrictions, illiquidity and taxation. Emerging markets pose greater risks than investments in developed markets.
Schroder Global Equity Alpha Plus – Best Ideas
As of: December 31, 2014
Definition of the Firm: The Firm is defined as all accounts managed by Schroder Investment Management in the UK and US, by wholly owned subsidiaries of Schroders PLC. Prior
to January 1, 2007 SIM London & SIM North America existed as two separate Firms which were compliant & verified as separate entities until December 31, 2006. The consolidation
of these two Firms was made as part of a move towards creating one global Firm. Composite and Firm assets reported prior to January 1, 2007 represent those of the legacy firm
which managed the product. Prior to January 1, 2011 the SPrIM (Schroder Property Investment Management) Firm existed separate to the Schroder Investment Management UK
and US Firm, from January 1, 2011 these Firms have been combined into a single firm. On April 2, 2013, Schroder U.S. Holdings Inc., a subsidiary of Schroders plc, purchased STW
Fixed Income Management LLC (“STW”) and on July 2, 2013, Schroders plc, purchased Cazenove Capital Holdings; assets managed by STW and Cazenove are included in the Firm
from January 1, 2014. Assets Managed against a liability driven mandate are excluded from the GIPS Firm.
A complete list and description of the Firm’s composites and performance results is available upon request.
Composite Definition: The Schroder Global Equity Alpha Plus - Best Ideas (the “Composite”) is comprised of all Schroder Investment Management (UK & US), fully discretionary
accounts which seek to achieve strong and consistent returns through investment in global equities via a concentrated portfolio of the investment team’s best investment ideas. The
composite benchmark is MSCI AC World (NDR).
Composite Construction: New accounts are included from the beginning of the first full month of management on a discretionary basis. Terminated accounts are excluded from
the end of the last full month of discretionary management. This Composite has no minimum asset level for inclusion.
The composite currency is US Dollar
Composite Inception Date: 05-31-2010
Composite Creation Date: 01-15-2016
Calculation Methodology: The portfolio returns are time-weighted rates of return that are adjusted for cash flows. Portfolio returns are combined using beginning of period asset
weights to produce the composite return. Periodic returns are geometrically linked to produce annual returns. Dividends on equities are recognized net of irrecoverable withholding
tax. Since January 1999 dividends have been recognized as of the ex-dividend date having previously been recognized on a cash basis. Performance results are presented before
the deduction of management fees and custodian fees but after trading expenses.
Fee Calculation: The fee scale applied to the composite is 1.50% p.a.
Dispersion: The dispersion of annual returns is measured by the asset weighted standard deviation of portfolio returns represented within the composite for the full year provided a
minimum of 5 portfolios are available.
Additional Information: The exchange rates used are provided by WM. Each currency is valued at 4 pm on the last business day of the month. Additional information regarding
policies for valuing portfolios, calculating and reporting returns and a description of all composites are available on request.
Firm Assets
Firm Assets for end 2015 have not been included because Schroders PLC annual results for 2015 have not yet been released to the market.
GIPS Compliance and Verification: Schroder Investment Management (UK & US) claims compliance with the Global Investment Performance Standards GIPS® and has prepared
and presented this report in compliance with the GIPS standards. Schroder Investment Management (UK & US) has been independently verified for the periods January 1, 1996 to
December 31, 2014. The verification report(s) are available upon request. Verification assesses whether (1) the Firm has complied with all the composite construction requirements
of the GIPS standards on a firm-wide basis, and (2) the Firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards.
Verification does not ensure the accuracy of any specific composite presentation. Verification assesses whether (1) the firm has complied with all the composite construction
requirements of the GIPS standards on a firm-wide basis, and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS
standards. The Schroder Global Equity Alpha Plus Composite (the “Composite” has been examined for the periods January 1, 2009 to December 31, 2014. The verification and
performance examination reports are available upon request.
Composite Performance Results
Composite - Schroder Global Equity Alpha Plus - Best Ideas
Primary Benchmark - MSCI AC World (NDR)
Secondary Benchmark - n/a
Currency: USD
Gross Returns as of: Dec-31-2014
Firm: UK-INT
Year
2014
2013
2012
2011
2010*
Gross Composite
Return
2.37%
31.24%
13.37%
-12.08%
22.95%
Net Composite
Return
0.85%
29.30%
11.69%
-13.38%
21.88%
As at Dec 2014
Annualized 3 Year
Annualized 5 Year
Annualized 7 Year
Annualized 10 Year
Annualized S.I.3
Gross Composite
Return
15.05%
n/a
n/a
n/a
11.49%
Net Composite
Return
13.35%
n/a
n/a
n/a
9.84%
1
2
3
4
Primary
Benchmark
Return
4.16%
22.80%
16.13%
-7.35%
20.49%
Primary
Benchmark
Return
14.10%
n/a
n/a
n/a
11.67%
3 Year
Composite
Risk 1
11.96%
16.46%
n/a
n/a
n/a
3 Year Primary
Benchmark Risk1
10.64%
14.14%
n/a
n/a
n/a
Composite
Risk1
11.96%
n/a
n/a
n/a
15.86%
Primary
Benchmark Risk1
10.64%
n/a
n/a
n/a
13.97%
Number of
Portfolios
(throughout
period)
<5
<5
<5
<5
<5
Account
Dispersion2
n/a
n/a
n/a
n/a
n/a
Market Value at
end of Period
263,456,154
298,471,938
70,281,240
85,847,042
91,884,161
Average Account
Value at end of
Period
131,728,077
149,235,969
70,281,240
85,847,042
91,884,161
Annualized standard deviation of gross monthly returns for the composite and monthly returns for the benchmark
Asset weighted standard deviation of annual gross returns of accounts that have been in the composite for the entire year
Since Inception
Since December 31, 2003 Total Firm Assets include non-fee paying accounts. 2003 Total Firm Assets value has been restated due to the inclusion of those non-fee paying accounts.
Total Firm Assets from 2007 incorporate the UK & US firm merger as detailed in the Definition of the Firm, from the start of 2011 Schroder Property Investment Management Multi
Manager accounts are included in the Total Firm Assets
* Returns are for a part period year
N/A - Information is not statistically meaningful due to an insufficient number of portfolios for the entire year
Source: Schroders
PFS-GLBEQAPL
Percentage of
Firm Assets
0.09%
0.12%
0.03%
0.04%
0.05%
Total Firm Assets4
282,697,291,678.31
255,707,099,715.41
223,940,416,622.14
194,958,113,724.01
202,946,283,267.48