Schroder Emerging Market Equity
Strategy Fact Sheet – 1Q16
Strategy overview
Team highlights
Emerging Market Equity strategy provides exposure to a range
of developing countries around the world. These countries are
generally characterized by a stronger growth potential than
mature economies which may lead to the opportunity for premium
returns. The investable universe is commonly defined by the MSCI
Emerging Markets Index.
– Team manages approximately $23 billion in emerging market
equities globally
– Dedicated team of 47 investment professionals, average 14
years’ investment experience
– Stock analysts based in regional offices around the world
– Centralized decision making by London-based Fund Managers
Key features
– Target 50% value added from stock decisions, 50% from
country decisions
– Proven proprietary country model plus a judgmental overlay
drives country decisions
– Rigorous proactive risk controls including alpha-adjusted
tracking error and stop loss
– Strong proprietary stock research database – links all
teams globally
Composite performance
As of March 31, 2016
*Inception December 31,1991
30%
20%
Schroder Emerging Markets Equity (Gross)
Schroder Emerging Markets Equity (Net)
MSCI EM Index
10%
3.04 2.66
5.71
3.04 2.66
5.71
4.37 2.87 3.02
8.12
7.12
6.85
0%
-10%
-20%
-3.62
-5.04-4.50
-2.59-4.03
-4.13
3 yr
5 yr
10 yr
Annual S.I.*
-11.07
-12.03
-12.39
QTD
YTD
Difference (Gross)
1 yr
-2.67%
-2.67%
+0.95%
+0.88%
+1.54%
+1.36%
+1.01%
Difference (Net)
-3.06%
-3.06%
-0.36%
-0.54%
+0.10%
-0.15%
-0.26%
2015
2014
2013
2012
2011
Gross
-11.41%
-2.94%
-0.30%
22.33%
-15.98%
Net
-12.72%
-4.37%
-1.77%
20.52%
-17.22%
MSCI EM Index
-14.92%
-2.19%
-2.60%
18.22%
-18.42%
Difference (Gross)
+3.51%
-0.75%
+2.30%
+4.10%
+2.45%
Difference (Net)
+2.20%
-2.18%
+0.83%
+2.29%
+1.21%
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 Emerging Market Equity
Country allocation (%)
Portfolio & risk statistics
26.4
23.9
China
Schroder
Emerging
Market Equity
MSCI EM
Index
104
835
Weighted average market cap
($billions)1
57.20
38.02
Price to earnings ratio
(trailing 12 month)2
13.18
13.64
Price to earnings ratio
(forward 12 month)3
11.85
11.65
1.58
1.42
12.00
10.40
0.93
-
19.9
Korea
Taiwan
7.8
8.1
6.5
6.6
6.1
India
Brazil
Russia
3.7
3.6
South Africa
15.6
12.5
12.4
Number of holdings
7.3
2.6
4.5
2.4
1.6
2.1
2.2
1.9
0.3
1.4
1.4
1.2
1.3
1.0
0.9
0.9
1.4
0.7
2.7
0.7
0.4
0.6
0.2
0.5
0.0
0.3
0.0
0.0
0.5
0.0
0.2
0.0
3.5
0.0
0.4
0.0
1.0
1.0
0.0
Mexico
Turkey
Thailand
Hungary
Poland
Chile
United Arab Emirates
Philippines
Indonesia
Greece
Egypt
Kuwait
Argentina
Colombia
Czech Republic
Malaysia
Peru
Qatar
Cash
0
Price to book (trailing 12 month)4
Return on equity (5 years)5
Beta† (gross, 3 years)
Source: Schroders, MSCI and Factset as of March 31, 2016. Representative portfolio.
Schroder Emerging
Market Equity
MSCI EM Index
10
20
Source: Schroders, MSCI and Factset as of March 31, 2016.
Representative portfolio.
30
40
*Composite. †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. 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.
Top ten holdings
Country
% of Total Market Value
Taiwan
5.21
1.
TSMC
2.
Samsung Electronics
Korea
5.21
3.
Tencent
China
5.17
4.
China Construction Bank
China
3.61
5.
China Mobile
China
3.51
6.
Sinopec
China
2.46
7.
AIA Group
China
2.20
8.
Hon Hai
Taiwan
1.94
9.
Alibaba Group
China
1.90
10.
HDFC Bank
India
1.76
Total
Source: Schroders, as of March 31, 2016. Representative portfolio.
Securities listed are shown for illustrative purposes and are not to be considered a recommendation to buy or sell.
32.97
Schroder Emerging Market Equity
Quarterly Commentary
Market Review
Emerging markets rose during the first quarter. The period was
characterized by an exceptional degree of market volatility. Global
markets started the year poorly, in part given concerns of a
recession in the US and uncertainty over Chinese currency policy.
The deferral of expectations for further monetary policy tightening
in the US, however, led the market backdrop to reverse and global
markets rebounded. The dollar weakened by approximately 5% on
a trade weighted basis and commodity prices recovered resulting in
significant market rotation.
This was evident at the country level with perceived fragile markets
such as Indonesia, Malaysia, Brazil, Turkey and South Africa
rebounding, supported by local currency appreciation compared
to the US dollar. Commodity producers such as Russia, Peru and
Colombia were also among the strongest performers.
The more cyclical materials and energy sectors outperformed and
low quality, high margin and those stocks which had performed
poorly previously, were, generally speaking, among the strongest
performers. In addition, the quality growth trade which has
dominated in recent years experienced a sharp reversal of. Add in
country and stock specific effects and it was a difficult backdrop
in which to perform with both our country allocation and stock
selection suffering.
Performance and Strategy
The Global Emerging Markets Equity strategy underperformed
the benchmark over the quarter. Our underweights to Indonesia,
South Africa and Malaysia, all of which outperformed in part given
ongoing supportive US dollar global liquidity, detracted value. Our
overweight position in China, which underperformed, also weighed
on returns. Despite some signs of stabilization in economic growth,
the Chinese market underperformed. This was somewhat offset by
the overweight to Russia, which outperformed given some recovery
in energy prices.
Stock selection was negative, detracting in South Africa (overweight
Naspers and Woolworth - the internet company and retailer both
with significant overseas earnings underperformed given local
currency strength and hopes of domestic economic improvement
supporting domestic orientated companies returns), Brazil
(overweight Embraer – the aerospace company detracted after
posting disappointing results and due to the stronger Brazilian
exchange rate affecting overseas revenue; underweight Banco
Bradesco – the bank outperformed on expectation of a change
in the Brazilian government, with consequent improvement in
economic management), Korea (overweight Amorepacific –
the cosmetic producer underperformed on concerns over the
sustainability of Chinese demand), Taiwan (overweight Cathay
Financial – the financial company underperformed on low interest
rate), India (overweight Maruti Suzuki - the automobile manufacturer
underperformed on deterioration of margin expectations; overweight
Lupin - the pharmaceuticals company performed poorly following
a negative FDA inspection) and Russia (overweight Luxoft – the IT
service provider underperformed on missed earnings; overweight
Mail.Ru – the internet company underperformed after strong
performance in 2015 and market rotation with IT underperforming
Energy and Financials in 2016).
This was slightly offset by positive stock selection in China
(overweight Sinopec – the oil group outperformed as it benefited
from reasonably stable downstream earnings and more recently the
oil price recovery).
Outlook
If investors were looking for some resemblance of calm in the
markets after the volatility in 2015, then 2016 will have so far sorely
disappointed. The year started poorly with global markets, including
EMs losing value on global growth and US recession concerns.
Ongoing fears of a deterioration in Chinese growth and uncertainty
around Chinese currency policy further weighed on risk sentiment.
The deferral of expectations for further monetary policy tightening
in the US, however, led the market backdrop to reverse and global
markets rebounded. To put the move in context, since January
20th to the end of the quarter the MSCI Emerging Markets index
has returned over 20% and outperformed the MSCI World index by
around 9%. Such a strong move has prompted speculation whether
this is the start of a sustained move higher or instead a temporary
respite from a prolonged period of EM relative underperformance.
The primary driver of the rally in EMs was US dollar weakness with
the dollar weakening by around 5% on a trade-weighted basis. This
contributed to a recovery rally in commodity prices, which are priced
in dollars. There were also signs of stabilization in the Chinese
economy after the implementation of significant policy stimulus.
So is this the start of a sustained move higher in EMs absolute
returns? We are not convinced and remain somewhat skeptical of
the recent rally. The characteristics of the recent rally look to confirm
our suspicions with several of the hallmarks of a bear market rally.
The crux of it comes down to the fact that while there has been
a dissipation of several of the headwinds facing EMs, we do not
believe there is sufficient evidence of a change to the underlying
macroeconomic picture to warrant a structural turn in markets, at
least not yet.
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 Emerging Market Equity
Risk
Potential investors should be aware that investment in Emerging Markets involves an above average degree of risk and should be seen
as long-term in nature. Less developed markets are generally less well regulated than mature markets, they may be less liquid and have
less reliable custody arrangements. Investments in foreign companies may involve special risk, including; political, liquidity, information,
regulatory or currency risk. In addition, investing in emerging markets may result in an increase in the general foreign investment risks
mentioned above.
Schroder Global Emerging Markets Equity Composite
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: Accounts included in the Schroder Global Emerging Markets Equity Composite seek to achieve returns above the MSCI EMF Net (MSCI EMF ex Malaysia
Gross prior to 06/01/00) index (or a similar benchmark) by providing capital growth primarily through investment in equity securities of emerging markets companies. Derivatives may
be used to reduce risk or manage the fund more effectively. From 10/31/14 only accounts with the ability to invest 85% or more in line with SISF Emerging Markets will be included
in the composite. A margin of 2% either direction will applied when reviewing accounts to be included/excluded from the composite.
Composite Construction: The composite returns include all of the Firm’s separate accounts and commingled funds which are discretionary, fee paying, taxable or tax exempt and
managed as described above. New accounts are included in the composite one full month after inception date to ensure the account has been fully invested. Terminated accounts
are excluded from the composite at the end of the previous month. This Composite has no minimum asset level for inclusion.
The composite’s creation date is 05-15-2008
The composite’s start date is 12-31-1991
Calculation Methodology: Composite returns are presented as gross returns, including cash, reinvestment of dividends, interest and other income earned in the period and are
calculated on a trade date basis after transaction charges (brokerage commissions). Each account’s investment performance rate of return is calculated monthly in accordance with
the ‘time-weighted’ rate of return method (Modified Dietz). Additional information regarding policies for valuing portfolios, calculating and reporting returns is available upon request.
The Currency of the Composite is USD. Withholding Tax treatment may vary from portfolio to portfolio within this composite.
Fee Calculation: Net returns have been calculated based upon the highest fee rate charged to each account in the composite. The fee scale applied to the composite is 1.5% per
annum from the beginning of 2007 onwards; prior to this a fee of 1% per annum is applied.
Dispersion: Internal dispersion is calculated using asset weighted standard deviation of all portfolios where there are at least 5 portfolios that are included in the composite for the
entire year.
Leverage: None of the accounts in the Composite use leverage.
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 Statement: 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 Schroder Global Emerging Markets Equity Composite
(the “composite”) has been examined for the periods January 1, 2007 to December 31, 2014. The verification and performance examination reports are available upon request.
Composite Performance Results
Composite - Schroder Global Emerging Markets Equity Composite
Benchmark - MSCI EMF Net (MSCI EMF ex Malaysia Gross prior to 01/06/00)
Currency: USD
Gross Returns as of: Dec-31-2014
Firm: SIMNA
Year
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
Gross Composite
Return
-2.94%
-0.30%
22.33%
-15.98%
13.76%
77.72%
-51.14%
41.90%
34.95%
33.99%
18.27%
57.72%
-8.12%
-7.13%
-34.76%
70.83%
Net Composite
Return
-4.37%
-1.77%
20.52%
-17.22%
12.08%
75.09%
-51.86%
39.80%
33.61%
32.66%
17.10%
56.16%
-9.03%
-8.05%
-35.41%
69.13%
Benchmark
Return
-2.19%
-2.60%
18.22%
-18.42%
18.88%
78.51%
-53.33%
39.39%
32.17%
34.00%
25.55%
55.82%
-6.17%
-2.62%
-30.82%
66.41%
3 Year
1
Composite Risk
14.79%
19.06%
21.73%
25.85%
31.85%
31.75%
28.60%
18.67%
17.63%
16.92%
18.87%
24.80%
25.10%
27.96%
29.62%
29.67%
As at Dec 2014
Annualized 3 Year
Annualized 5 Year
Annualized 7 Year
Annualized 10 Year
Annualized S.I.3
Gross Composite
Return
5.79%
2.50%
-0.25%
9.69%
9.02%
Net Composite
Return
4.22%
0.99%
-1.73%
8.17%
7.75%
Benchmark
Return
4.04%
1.78%
-1.34%
8.43%
8.01%
Composite Risk
14.79%
18.55%
24.62%
23.27%
23.09%
1
3 Year
Benchmark
1
Risk
15.21%
19.31%
21.80%
26.13%
33.04%
32.80%
29.07%
18.36%
17.55%
16.66%
17.85%
23.37%
23.25%
25.81%
29.81%
30.63%
Number of
Portfolios
(throughout
period)
31 (29)
32 (32)
32 (28)
30 (23)
25 (19)
17 (15)
15 (12)
11 (11)
<5
<5
<5
<5
12 (12)
18 (17)
16 (13)
15 (9)
Account
Dispersion2
0.29%
0.19%
0.40%
0.27%
0.40%
0.65%
0.35%
0.86%
n/a
n/a
n/a
n/a
0.78%
1.32%
1.09%
2.11%
Market Value at
end of Period
13,682,200,086
14,089,892,280
13,628,256,354
9,559,799,999
9,409,774,038
5,883,615,906
2,591,534,645
4,104,755,827
107,395,259
137,348,002
507,548,430
1,700,430,338
2,524,297,413
5,107,738,138
5,284,508,019
8,334,164,411
Average Account
Value at end of
Period
441,361,293
440,309,134
425,883,011
318,660,000
376,390,962
346,095,053
172,768,976
373,159,621
53,697,630
137,348,002
507,548,430
566,810,113
210,358,118
283,763,230
330,281,751
555,610,961
Benchmark
Risk1
15.21%
18.55%
25.35%
23.74%
23.17%
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
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 Multi
Manager accounts are included in the Total Firm Assets
N/A - Information is not statistically meaningful due to an insufficient number of portfolios for the entire year
* Return from composite inception date to end of year
Source: Schroders
PFS-EME
Percentage of
Firm Assets
4.84%
5.51%
6.09%
4.90%
4.64%
3.65%
2.89%
2.55%
0.30%
0.47%
1.82%
6.26%
11.29%
16.49%
13.78%
17.55%
4
Total Firm Assets
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
35,533,229,886.00
29,123,758,149.00
27,861,264,909.00
27,165,162,499.00
22,354,464,000.00
30,975,119,000.00
38,355,527,000.00
47,492,361,000.00