Schroder QEP Global Blend Equity
Strategy Fact Sheet – 1Q16
Strategy overview
Team highlights
Schroder QEP Global Blend Equity invests in stocks on the basis
of valuations and business quality. The advantage of combining
Value and Quality opportunities is that, while both have tended to
outperform over time, they have delivered their returns at different
stages of the economic cycle, offering investors the potential for
outperformance across a broad range of market environments.
– 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
Schroder QEP Global Blend Equity seeks to produce a long run
return of +3% per annum (gross of fees) above the MSCI All
Country World Index (net dividends reinvested) or comparable
global benchmarks.
Key features
1. Stock selection based on complementary return drivers: Stock selection is grounded in two clear fundamental drivers: company
valuations and business quality (as defined by profitability, stability and financial strength). We believe these two characteristics are the
key drivers of long-run equity returns and are, moreover, highly complementary in that they tend to perform at different stages of the
market cycle.
2. A truly diversified, actively managed portfolio: We rank stocks on a daily basis across multiple valuation and quality criteria to build a
diversified portfolio of over 400 stocks.
3. Look beyond the index to maximize the opportunity: A globally unconstrained approach. By looking beyond the index, we are able to
exploit the potential of companies across the market capitalization spectrum and emerging markets.
4. Stock weights determined by fundamentals, not market cap: Our approach is to weight stocks based upon their fundamentals and
liquidity. This is more balanced and reduces ‘mega-cap’ drag.
Composite performance
As of March 31, 2016
*Inception September 30, 2008
30%
20%
†MSCI ACWI captures large and
mid cap representation across
23 Developed Markets (DM)
and 23 Emerging Markets (EM)
countries. With 2,480
constituents, the index
covers approximately 85%
of the global investable
equity opportunity set.
Schroder QEP Global Blend Equity (Gross)
Schroder QEP Global Blend Equity (Net)
MSCI AC World Index†
8.05
10%
6.14 4.82 5.53
1.78 1.46
0%
0.24
5.71 4.41 5.22
6.71 6.34
1.78 1.46
0.24
-3.53 -4.72 -4.34
-10%
QTD
YTD
1 yr
3 yr
5 yr
Annual S.I.*
Difference (Gross)
+1.54%
+1.54%
+0.81%
+0.60%
+0.49%
+1.70%
Difference (Net)
+1.22%
+1.22%
-0.38%
-0.71%
-0.82%
+0.37%
2015
2014
2013
2012
2011
Gross
-3.41%
3.42%
25.55%
16.53%
-6.90%
Net
-4.60%
2.14%
24.00%
15.09%
-8.05%
MSCI AC World
-2.36%
4.16%
22.80%
16.13%
-7.35%
Difference (Gross)
-1.05%
-0.74%
+2.75%
+0.40%
+0.45%
Difference (Net)
-2.24%
-2.02%
+1.20%
-1.04%
-0.70%
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 Blend Equity
Size allocation (%)
Regional allocation (%)
50.1
Mega (>$20bn)
45.8
North America
56.2
71.0
18.5
15.5
Cont Europe
28.0
25.1
Large ($5bn-$20bn)
17.8
Mid ($1bn-$5bn)
10.7
6.5
7.4
7.5
United Kingdom
Japan
3.9
5.4
4.0
Pacific Ex Japan
3.6
Small ($250m-$1bn)
0.0
Micro (<$250m)
0.5
0.0
Emerging Markets EMEA
Schroder QEP Global Blend Equity
Emerging Markets LATAM
MSCI AC World Index
0.0
Cash
0.0
4.1
1.7
1.1
1.4
Schroder QEP Global Blend Equity
MSCI AC World Index
0.0
0
20
40
Source: Schroders, MSCI as of March 31, 2016.
60
80
Sector allocation (%)
Health Care
11.7
Industrials
10.3
9.5
Consumer Discretionary
14.4
13.9
16.1
45
Active share1
13.1
60
75
70.6%
Total weight of non-index stocks
13.1
22.0%
2
8.6
Materials
Cash 0.0
0
15
30
Source: Schroders, MSCI as of March 31, 2016.
Portfolio characteristics
Information Technology
Tracking Error (annualized since inception)
2.19
Number of stocks
644
4.8
8.4
Banks
11.3
8.3
Consumer Staples
Energy
Insurers/Asset Mgt
Telecommunication Svcs
4.1
1.1
Real Estate
6.5
7.0
6.2
5.5
10.6
3
Weighted average market cap ($m)
7.8
Price to book4
3.5
Schroder QEP Global Blend Equity
3.5
MSCI AC World Index
0.8
Utilities
Cash
7.1
7.1
Emerging Markets Asia
0.0
0.0
0
5
10
15
61,559
1.85
Price to earnings5
15.21
6
Return on equity
21.71
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.
Source: Schroders, MSCI as of March 31, 2016. Inception date November 9, 2010.
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. Characteristics are vs. MSCI AC World Index.
Top ten holdings
Country
% of Total Market Value
United States
0.77
Switzerland
0.77
United States
0.77
1.
Amgen Inc.
2.
Roche Holdings AG
3.
Intel Corporation
4.
Telstra Corporation
Australia
0.76
5.
Microsoft Corporation
United States
0.74
6.
Apple Inc.
United States
0.74
7.
Kddi Corporation
8.
Johnson & Johnson
9.
Taiwan Semiconductor Manufacturing
10.
UnitedHealth Group Inc.
Total
Japan
0.73
United States
0.73
Taiwan, Province Of China
0.70
United States
0.70
7.41
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 above statistics 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 Blend 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
mid-February 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
momentum-driven market that has been a something of 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 valuation anchor. We believe the common
view that value can only be captured today by taking on excessive
risk to be overly simplistic. Opportunities in attractively-valued, high
quality stocks are spread much more widely than the traditional
‘risky value’ areas of emerging markets and resources. To mention
just a few, we see significant opportunities in high quality US
industrials, global banks and the UK market. Additionally, emerging
markets is a broad church and offers plenty of high quality stocks
trading at attractive valuations. We see a favorable backdrop for
further emerging market outperformance, although we remain aware
of downside risks and fully expect dispersion amongst emerging
markets to return soon.
Performance and Strategy
The QEP Global Blend strategy strongly outperformed the MSCI
AC World Index over the quarter, with the largest contributions
coming from Emerging Markets. Our holdings boosted relative
performance in countries as diverse as Taiwan (technology), Brazil
(utilities), Russia (energy) and South Africa (materials and telecoms).
From a global sector perspective, positives came from consumer
discretionary, technology and industrials, principally in the US.
Amongst industrials our long-favored machinery holdings produced
the strongest effect. Otherwise we benefited from lower weights
in some ‘glamorous growth’ stocks,. In the same vein, in the
healthcare sector our avoidance of some North American biotech
and pharmaceuticals was a positive.
A revival of the ‘reach for yield’ trade in US utilities and REITS was
a modest headwind to performance – we see these two areas as
unattractive and hold a zero weight. Elsewhere in financials our
avoidance of Canadian banks detracted as they staged a partial
recovery over Q1 from their poor performance of 2015.
Outlook and Positioning
We maintain our broad range of global opportunities within cyclical
sectors. In industrials, we have taken profits in some positions after
strong performance over the quarter but maintain our exposure to
a range of attractively-priced, high quality opportunities, particularly
within the US defense and machinery industries. Our preference
in consumer discretionary is for companies in well-established
and shareholder-friendly industries such as retail, media and auto
component makers. In technology our exposure focuses on the less
glamorous and more attractively-valued ‘mature’ technology stocks
with strong cashflow generation.
In defensives we retain our preference for healthcare stocks,
particularly in pharmaceuticals and healthcare equipment. Within
telecoms we retain our preference for Japanese, European and
Emerging Market stocks, where dividends are well covered by
cashflows. US, UK and Japanese utilities remain unattractive in our
view and we have a zero weighting.
The portfolio’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 now over-sold simple banks in the US to lower
quality but recovering banks in Europe – and we have added to a
number of positions. Within insurance we have added to a number
of opportunities amongst our preferred high quality companies with
a focus on long-term business strength and diversity.
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 Blend 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 Blend
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 Blend 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 AC World (NDR), MSCI World (NDR) or comparable index through active investment in diversified,
index-unconstrained, Value and Quality style-biased portfolios. Composite accounts invest predominantly in equities and equity-related securities, although other financial instruments
are permitted. Derivatives may be used to achieve the investment objective and to reduce risk or manage the fund more efficiently. None of these accounts use leverage. The
composite was redefined on February 15, 2012, to allow only accounts which use Close of Business (COB) pricing to be members of the composite. The redefinition was to remove
the impact that price timing has on particular stocks which can affect dispersion within the composite. This description was redefined on 11/29/2012, 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.
As of November 2013 the primary benchmark for this composite was changed from MSCI World (NDR) to the MSCI AC World (NDR) for all periods since inception. The latter is a more
appropriate comparison for the strategy, as emerging markets are typically included in the investment universe. No change was made to the investment process and the benchmark
continues to be used only as a reference for performance comparison.
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: 09-30-2008
Composite Creation Date: 01-15-2010
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 management fee of 1.25%. 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 firms policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The QEP – Global Blend (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 Blend
Primary Benchmark - MSCI AC World (NDR)
Secondary Benchmark - MSCI World (NDR)
Currency: USD
Gross Returns as of: Dec-31-2014
Firm: UK-INT
Year
2014
2013
2012
2011
2010
2009
Gross Composite
Return
3.42%
25.55%
16.53%
-6.90%
17.06%
40.45%
Net Composite
Return
2.14%
24.00%
15.09%
-8.05%
15.62%
38.72%
As at Dec 2014
Annualized 3 Yea
Annualized 5 Yea
Annualized 7 Yea
Annualized 10 Yea
Annualized S.I 3
Gross Composite
Return
14.80%
10.52%
n/a
n/a
10.03%
Net Composite
Return
13.38%
9.16%
n/a
n/a
8.67%
Primary
Benchmark
Return
4.16%
22.80%
16.13%
-7.35%
12.67%
34.62%
Primary
Benchmark
Return
14.10%
9.17%
n/a
n/a
8.03%
Secondary
Benchmark
Return
4.94%
26.68%
15.83%
-5.54%
11.76%
29.99%
Secondary
Benchmark
Return
15.47%
10.20%
n/a
n/a
8.37%
3 Year
Composite
Risk 1
11.03%
14.74%
17.00%
20.47%
n/a
n/a
3 Year Primary 3 Year Secondary
Benchmark Risk1 Benchmark Risk1
10.64%
10.37%
14.14%
13.73%
17.37%
16.98%
20.88%
20.44%
n/a
n/a
n/a
n/a
Composite
Risk1
11.03%
14.39%
n/a
n/a
18.57%
Primary
Secondary
Benchmark Risk1 Benchmark Risk1
10.64%
10.37%
14.57%
14.30%
n/a
n/a
n/a
n/a
18.44%
17.97%
Number of
Portfolios
(throughout
period)
12 (11)
11 (9)
11 (7)
8 (6)
6 (6)
3 (1)
Account
Dispersion2
n/a
n/a
n/a
n/a
n/a
n/a
Market Value at
end of Period
6,629,178,418
6,895,293,060
6,485,351,991
4,247,751,677
4,198,001,749
1,383,414,677
Fee Schedule
Net of fees composite returns are prepared by deducting a model fee based on the highest retail management fee of 1.25%. 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 benchma
2 Asset weighted standard deviation of annual gross returns of accounts that have been in the composite for the entire ye
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 accou
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 M
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 ye
Source: Schroders
PFS-QEP-GLBLEND
Average Account
Value at end of
Period
552,431,535
626,844,824
589,577,454
530,968,960
699,666,958
461,138,226
Percentage of
Firm Assets
2.34%
2.70%
2.90%
2.18%
2.07%
0.86%
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