Schroder QEP Global Core Equity
Strategy Fact Sheet – 1Q16
Strategy overview
Team highlights
Schroder QEP Global Core Equity is based upon combining
fundamental data and well-researched behavioral insights, while
also placing considerable emphasis upon portfolio construction
and genuine diversification of risk. The portfolio is well diversified
and constructed with the aim of outperforming the benchmark
across all major market environments. We believe our approach
should represent a core investment for investors aiming to efficiently
outperform global equity indices with low index relative risk.
– Over 15 years track record in managing global equity portfolios
– Team manages over $39 billion in assets
– Investment philosophy is based upon combining fundamental
data and well-researched behavioral insights
– Considerable emphasis is placed upon portfolio construction
and genuine diversification of risk
Key features
The key strength of our investment approach is the goal of producing consistent, repeatable performance while taking limited index-relative
risk. The strategy seeks to generate positive excess returns in the future as a result of:
1. A Fundamental basis: Our stock selection starts with two key fundamentals: Value and Quality. We measure Value on both an absolute and
relative basis while Quality is captured through analyzing the underlying building blocks of a company, namely profitability, stability and financial
strength.
2. Behavioral analysis: After evaluating company fundamentals we use a ‘decision tree’ approach to produce a final stock ranking. We believe
our approach more closely matches how many investors actually evaluate companies to arrive at investment decisions.
3. Efficient risk management: We carefully manage top-down risks, such as market direction, currency or sectors, which are on average
inherently difficult to forecast consistently. We diversify the portfolio across over +500 stocks, while efficiently managing multiple themes and
investment strategies.
4. Forward looking research: We believe in innovation not extrapolation. We are always looking to develop new research insights according to
changing market conditions and when analyzing past relationships we seek to understand both their rationale and context.
Composite performance
As of March 31, 2016
*Inception January 31, 2000
15%
10%
†The MSCI World Index captures
large and mid cap representation
across 23 Developed Markets
countries. With 1,644 constituents,
the index covers approximately
85% of the free float-adjusted
market capitalization in
each country.
Schroder QEP Global Core Equity (Gross)
Schroder QEP Global Core Equity (Net)
MSCI World Index†
7.42 6.99 6.82
7.21 6.78
6.51
5%
0%
-5%
0.25 0.15
-0.35
5.33 4.914.27
4.28
3.86 3.19
0.25 0.15
-0.35
-2.14-2.53
-3.45
QTD
YTD
1 yr
3 yr
5 yr
10 yr
Annual S.I.*
Difference (Gross)
+0.60%
+0.60%
+1.31%
+0.60%
+0.69%
+1.06%
+1.09%
Difference (Net)
+0.50%
+0.50%
+0.92%
+0.17%
+0.27%
+0.64%
+0.67%
2015
2014
2013
2012
2011
Gross
-0.51%
4.84%
27.75%
15.87%
-3.84%
Net
-0.90%
4.42%
27.24%
15.41%
-4.22%
MSCI World Index
-0.87%
4.94%
26.68%
15.83%
-5.54%
Difference (Gross)
0.36%
-0.10%
+1.08%
+0.05%
+1.70%
Difference (Net)
-0.03%
-0.52%
+0.57%
-0.42%
+1.32%
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 QEP Global Core Equity
Size allocation (%)
Regional allocation (%)
63.2
Mega (>$20bn)
Cont Europe
23.5
23.4
Large ($5bn-$20bn)
Mid ($1bn-$5bn)
Small ($250m-$1bn)
Cash
11.7
1.2
0.0
Schroder QEP Global Core Equity
MSCI World Index
0.4
0.0
0
20
40
Source: Schroders, MSCI as of March 31, 2016.
60
80
100
Sector allocation (%)
13.8
13.7
12.7
11.7
10.8
11.6
13.3
11.1
10.6
Health Care
Industrials
Consumer Discretionary
Banks
9.3
Consumer Staples
Insurers/Asset Mgt
Materials
4.6
3.7
3.8
Telecommunications Svcs
Real Estate
Utilities
1.9
1.3
8.0
7.2
8.3
Japan
8.4
4.4
Pacific Ex Japan
4.5
1.2
Emerging Markets Asia
0.0
0.6
Emerging Markets EMEA
0.0
Schroder QEP Global Core Equity
0.4
Emerging Markets LATAM 0.0
MSCI World Index
0.4
Cash 0.0
0
20
40
60
80
Source: Schroders, MSCI as of March 31, 2016.
Portfolio characteristics
Information Technology
Energy
16.6
17.3
United Kingdom
2.5
Micro (<$250m) 0.0
0.0
60.2
62.7
North America
74.1
15.9
10.9
6.8
6.3
6.5
6.2
6.0
3.5
Schroder QEP Global Core Equity
3.5
MSCI World Index
0.4
Cash 0.0
0
5
10
15
20
Source: Schroders, MSCI as of March 31, 2016.
Sectors/regions/market caps listed are shown for illustrative purposes and are not to
be considered a recommendation to buy or sell.
Active share1
54.2%
Total weight of non-index stocks
13.7%
Tracking Error (annualized since inception)2
1.05
Number of stocks
650
3
Weighted average market cap ($m)
Price to book4
102,483
2.02
Price to earnings5
15.73
Return on equity6
22.49
Source: Schroders, MSCI as of March 31, 2016. Inception date September 30, 2001.
Characteristics are vs. MSCI World Index.
1. Measures the percentage amount the portfolio differs from the benchmark. A reading of 0% suggests holdings are identical to the benchmark. 2. The annualized standard
deviation of the active returns of a portfolio relative to the benchmark. 3. 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. 4. 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. 5. The
sum of a company’s price-to-earnings, calculated by taking the current stock price and dividing it by the trailing earnings per share for the past 12 months. 6. The amount of net
income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money
shareholders have invested.
Top ten holdings
Country
% of Total Market Value
1.
Apple Inc.
United States
2.23
2.
Microsoft Corporation
United States
1.56
3.
Alphabet Inc.
United States
1.51
4.
Exxon Mobil Corporation
United States
1.26
5.
Johnson & Johnson
United States
1.19
6.
Wells Fargo & Company
United States
1.00
7.
Nestle SA
8.
JP Morgan Chase & Company
9.
Roche Holdings AG
10.
Pfizer Inc.
Total
Switzerland
0.98
United States
0.94
Switzerland
0.82
United States
0.81
12.31
Source: Schroders as of March 31, 2016.
Securities listed (excluding cash and cash equivalents) are shown for illustrative purposes and not to be considered a recommendation to buy or sell. The top ten holdings are based
on a representative account. Cash and cash equivalents are excluded from the calculations. These holdings are subject to change and should not be viewed as an investment
recommendation. It should not be assumed that any of these holdings were or will be profitable.
Schroder QEP Global Core Equity
Quarterly Commentary
Market Review
It was a very volatile start to the year for global equity markets. By
mid-February they had fallen sharply due to concerns about the
strength of the global economy. As has often been the case recently
when investors take fright, policymakers marched to the rescue.
Dovish moves by central banks underscored a big rebound in
commodity prices. Firmer oil prices, which appear to have become
the key barometer of investors’ risk tolerance, played a significant
role in boosting sentiment. Developed markets rallied strongly over
the remainder of the quarter, but it was the new found strength in
emerging markets and riskier assets more generally that further
reinforced the recovery. Emerging markets ended the quarter
around 6% ahead of developed equities.
The first quarter bore the hallmarks of a period of market rotation, as
the extremes of the last few years receded and tentative signs of a
recovery in Value as an investment style emerged. Since the midFebruary low, market performance has been broadening out from the
narrow cohort of winners that dominated last year and has been led by
previous laggards. These are reasons to believe that the momentumdriven market that has been a headwind to our performance in recent
years is at least abating and perhaps even reversing.
The dominant performance of growth stocks and defensive equities
in recent years has created plenty of opportunities for investors,
particularly those with a value orientation. We believe the common
view that value can only be captured today by taking on excessive
risk to be overly simplistic. Value opportunities are spread much
more widely than the traditional ‘risky’ areas of emerging markets
and resources. For example, US industrials as a group have been
punished as a result of their perceived exposure to the strong dollar;
the lack of discrimination of the basis of actual exposure leaves
some stocks on very attractive valuations. Banks also offer some
attractive value opportunities at the moment, particularly in the US
market where some are selling at less than book value, despite
strong balance sheets. Other interesting value themes include the
UK market (which is being penalized due to uncertainty surrounding
June’s Brexit referendum), Hong Kong property, and much of the
Japanese market.
Performance and Strategy
The QEP Global Core strategy outperformed over the first quarter.
Notable positives came from stock selection within consumer
discretionary, technology and industrials, particularly in the US. Our
long-held preference for high quality US industrials, in particular
machinery, paid off. Our preference for ‘mature’ technology stocks
in the US, such as IBM, also contributed. Avoiding some of the
expensive growth names in the US, several of which suffered
earnings disappointments, also helped relative performance. Stock
selection in Japan was positive for the strategy, particularly in the
areas of telecoms and technology.
A revival of the ‘reach for yield’ trade in US utilities and REITS was
a modest headwind to performance – these are two areas which
we see as unattractive and therefore hold underweight exposure.
Elsewhere, in financials our avoidance of Canadian banks detracted
as they staged a partial recovery over the quarter from their poor
performance of 2015.
Outlook and Positioning
Within defensives we retain our preference for pharmaceuticals and
healthcare providers. Our underweight position in utilities is a result
of our low allocation to US utilities, which still look unattractive.
The strategy’s exposure to financials remains driven first by our view
of the quality (risk) of a company and then the right valuation for
any opportunity. Banks offer a broad range of value opportunities
– from high quality but over-sold simple banks in the US to lower
quality but recovering banks in Europe. Real estate stocks offering
good yields are overly popular with investors, especially in the US
where we have little exposure. Within insurance, we maintain our
preference for attractively-priced, high quality companies with a
focus on long-term business strength and diversity.
In cyclical sectors, the strategy’s weighting to technology remains
elevated. We still see opportunities in established technology stocks
while being underweight the newer, more glamorous stocks. Within
consumer discretionary we remain underweight larger Japanese
car exporters which look fully-valued, preferring higher quality auto
component makers. We maintain our exposure in the industrials
sector, which offers attractively-priced, high quality opportunities,
particularly among US defense and machinery stocks.
In resources we remain overweight integrated oil & gas stocks
relative to the more volatile exploration companies, and European
integrated oil & gas companies generally appear better value than
their US peers. Within materials, the strategy has more exposure
to higher quality and lower cost mining stocks, while being
underweight steel stocks.
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 450 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 QEP Global Core Equity
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 QEP Global Core
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 QEP – Global Core Composite (the “Composite”) is comprised of all Schroder Investment Management (UK & US), fully discretionary accounts that are
managed in a similar manner and seek to achieve a total return above the MSCI World (NDR) or comparable index through active investment in diversified, Value and Quality stylebiased portfolios, with limited index-relative risk. Composite accounts invest predominantly in equities and equity-related securities, although other financial instruments are permitted.
This description was redefined on 11/28/2012, the redefinition has been made to enhance the composite description by increasing the level of detail used to describe the investment
strategy. Previous disclosures are available upon request.
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: 01-31-2000
Composite Creation Date: 12-03-2010
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: Net of fees composite returns are prepared by deducting a model fee based on the highest retail bundled fee of 0.4% p.a. which includes management fees, trading
expenses, custody fees, fund accounting fees and marketing related expenses. Actual fees paid by institutional accounts in the composite were less than this amount.
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.
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. 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 QEP – Global Core (the “composite”) has been
examined for the periods January 1, 2012 to December 31, 2014. The verification and performance examination reports are available upon request.
Composite Performance Results
Composite - QEP - Global Core
Primary Benchmark - MSCI World (NDR)
Secondary Benchmark - MSCI World Ex Australia (NDR)
Currency: USD
Gross Returns as of: Dec-31-2014
Firm: UK-INT
Year
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Gross Composite
Return
4.84%
27.75%
15.87%
-3.84%
14.05%
32.32%
-38.62%
8.14%
20.64%
10.08%
15.59%
33.66%
-18.90%
-15.68%
Net Composite
Return
4.42%
27.24%
15.41%
-4.22%
13.60%
31.80%
-38.86%
7.71%
20.15%
9.64%
15.13%
33.12%
-19.23%
-16.02%
As at Dec 2014
Annualized 3 Year
Annualized 5 Year
Annualized 7 Year
Annualized 10 Year
Annualized S.I 3
Gross Composite
Return
15.78%
11.22%
4.73%
7.10%
4.66%
Net Composite
Return
15.32%
10.78%
4.32%
6.67%
4.25%
Primary
Benchmark
Return
4.94%
26.68%
15.83%
-5.54%
11.76%
29.99%
-40.71%
9.04%
20.07%
9.49%
14.72%
33.11%
-19.89%
-16.82%
Primary
Benchmark
Return
15.47%
10.20%
3.27%
6.03%
3.55%
Secondary
Benchmark
Return
5.20%
27.56%
15.59%
-5.32%
11.65%
28.61%
-40.38%
8.50%
19.80%
9.33%
14.39%
32.78%
-21.64%
-17.06%
Secondary
Benchmark
Return
15.76%
10.40%
3.32%
5.98%
3.31%
3 Year
Composite
Risk1
10.39%
13.67%
16.82%
20.28%
23.79%
21.42%
16.86%
8.06%
7.68%
9.89%
15.02%
17.89%
n/a
n/a
3 Year Primary 3 Year Secondary
Benchmark Risk1 Benchmark Risk 1
10.37%
10.29%
13.73%
13.57%
16.98%
16.71%
20.44%
20.20%
24.05%
23.79%
21.70%
21.49%
17.26%
17.03%
8.21%
8.07%
7.75%
7.67%
9.80%
9.80%
14.95%
16.80%
17.70%
19.27%
n/a
n/a
n/a
n/a
Composite
Risk1
10.39%
14.18%
18.15%
15.80%
15.70%
Primary
Secondary
Benchmark Risk1 Benchmark Risk1
10.37%
10.29%
14.30%
14.10%
18.35%
18.15%
15.99%
15.81%
15.83%
16.07%
Number of
Portfolios
(throughout
period)
12 (10)
9 (9)
8 (6)
6 (6)
6 (4)
5 (5)
5 (5)
5 (4)
5 (4)
5 (5)
5 (4)
4 (4)
4 (2)
2 (1)
Account
Dispersion2
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Market Value at
end of Period
9,855,266,532
8,876,293,634
5,628,890,056
3,705,886,794
3,571,116,013
1,417,656,587
925,225,132
1,729,346,836
1,746,482,993
1,309,814,557
909,108,594
643,749,653
382,296,101
400,654,207
Average Account
Value at end of
Period
821,272,211
986,254,848
703,611,257
617,647,799
595,186,002
283,531,317
185,045,026
345,869,367
349,296,599
261,962,911
181,821,719
160,937,413
95,574,025
200,327,104
Fee Schedule
Net of fees composite returns are prepared by deducting a model fee based on the highest retail bundled fee of 0.4% p.a. which includes management fees, trading expenses, custody fees, fund accounting fees and marketing related
expenses. Actual fees paid by institutional accounts in the composite were less than this amount.
1 Annualized standard deviation of gross monthly returns for the composite and monthly returns for the benchmark
2 Asset weighted standard deviation of annual gross returns of accounts that have been in the composite for the entire year
e
3 Since Inception
4 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
Manager accounts are included in the Total Firm Asset
N/A - Information is not statistically meaningful due to an insufficient number of portfolios for the entire year
Source: Schroders
PFS-QEPGCORE
Percentage of
Firm Assets
3.49%
3.47%
2.51%
1.90%
1.76%
0.88%
1.03%
1.07%
1.40%
1.37%
0.88%
0.71%
0.52%
1.68%
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
161,183,088,769.55
89,646,473,691.69
161,124,537,714.28
125,031,929,762.39
95,717,167,333.40
102,980,753,667.39
90,920,233,385.14
73,419,656,617.89
23,856,252,722.74