Schroder QEP Global Value Equity
Strategy Fact Sheet – 1Q16
Strategy overview
Team highlights
The Schroders QEP Global Value Equity strategy takes an indexunconstrained approach to global stock investing. The strategy
uses a Value-biased investment process that enables a wide
range of stock selection opportunities across all market caps.
While market cap indices have higher weights in expensive stocks,
this strategy’s largest weights are in good Value stocks (high
dividend yield and strong cash flow) with attractive fundamentals.
Schroder QEP Global Value Equity is designed to be extremely well
diversified and aims to deliver higher returns over the long term.
– 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
1. Value outperforms in the long run: Our analysis suggests that value investing has ‘worked’ in 36 out of 40 countries on an historical basis.
Academic evidence dating back to the 1920s further supports the idea that value is a powerful long-term investment strategy.1 Our approach
to investing is designed to invest alongside this favorable long-run tailwind from value.
2. Seeks high return without concentrated stock risk: Seeking higher returns can be associated with greater risk, as this is often achieved
through a very concentrated stock portfolio. We seek to reduce stock risk by building a highly diversified portfolio but with no less conviction.
3. 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 stock selection ‘mega-cap’ drag which is particularly acute for other value investors.
4. Bottom-up, index unconstrained investing for more efficient: We maximize our investment opportunities by systematically analyzing
over 15,000 global stocks every day. The more attractively-priced stocks we find in a particular region or sector, the greater the subsequent
portfolio allocation. This unconstrained bottom-up approach maximizes the potential return opportunity and avoids dead-money being
allocated to expensive stocks to satisfy index constraints.
1
Graham & Dodd (1934), Barbara & Lyon (1997), Basu (1977), Davies (1994), Fama and French (1992, 1993, 1995, 1998, 2006), Rosenberg, Reid and Lamstein (1985)
Composite performance
15%
As of March 31, 2016
*Inception October 31, 2004
Schroder QEP Global Value Equity (Gross)
Schroder QEP Global Value Equity (Net)
MSCI AC World Index†
10%
†
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.
5%
0%
1.20 0.82
0.24
1.20 0.82
5.53
3.71
4.48
5.22
2.93
4.62
4.08
3.07
6.87
5.295.96
0.24
-5%
-10%
5.27
-4.34
-5.62
-7.02
QTD
YTD
1 yr
3 yr
5 yr
10 yr
Annual S.I.*
Difference (Gross)
+0.96%
+0.96%
-1.28%
-0.27%
-0.75%
+0.54%
+0.91%
Difference (Net)
+0.58%
+0.58%
-2.68%
-1.83%
-2.29%
-1.00%
-0.67%
2015
2014
2013
2012
2011
Gross
-5.10%
3.20%
25.59%
15.79%
-9.19%
Net
-6.51%
1.68%
23.74%
14.07%
-10.53%
MSCI AC World Index
-2.36%
4.16%
22.80%
16.13%
-7.35%
Difference (Gross)
-2.74%
-0.96%
+2.79%
-0.34%
-1.84%
Difference (Net)
-4.14%
-2.48%
+0.93%
-2.06%
-3.19%
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 Value Equity
Size allocation (%)
Mega (>$20bn)
Regional allocation (%)
49.4
42.3
North America
56.2
71.0
18.4
15.5
Cont Europe
25.8
25.1
Large ($5bn-$20bn)
Mid ($1bn-$5bn)
18.1
Japan
3.9
4.5
Small ($250m-$1bn)
0.0
Micro (<$250m)
Cash
6.6
4.0
Emerging Markets Asia
6.7
7.1
Emerging Markets EMEA 1.7
Schroder QEP Global Value Equity
1.8
0.0
60
80
100
10.3
Information Technology
12.4
Banks
Consumer Discretionary
Materials
8.7
4.8
7.5
6.5
7.0
Energy
Consumer Staples
Insurers/Asset Mgt
Telecommunication Svcs
4.1
1.9
1.3
6.6
6.2
5.9
3.5
0
20
Source: Schroders, MSCI as of March 31, 2016.
40
60
80
Active share1
63.8%
Total weight of non-index stocks
22.1%
14.4
12.1
11.7
11.1
11.3
10.9
13.1
Health Care
MSCI AC World Index
Portfolio characteristics
12.8
Industrials
Schroder QEP Global Value Equity
1.1
1.4
1.8
Cash 0.0
Emerging Markets LATAM
MSCI AC World Index
Sector allocation (%)
Utilities
Pacific Ex Japan
3.7
0.4
0.0
0
20
40
Source: Schroders, MSCI as of March 31, 2016.
Real Estate
8.9
6.5
10.5
7.5
United Kingdom
Tracking Error (annualized since inception)2
3.40
Number of stocks
825
3
10.6
Weighted average market cap ($m)
59,060
Price to book4
1.63
Schroder QEP Global Value Equity
MSCI AC World Index
3.5
Cash 0.0 1.8
0
5
10
15
20
25
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.
Price to earnings5
14.47
6
Return on equity
19.14
Source: Schroders, MSCI as of March 31, 2016. Inception date February 7, 2014.
Characteristics are vs. MSCI AC 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.
Amgen Inc.
United States
0.66
2.
Intel Corporation
United States
0.66
3.
Telstra Corporation Ltd.
Australia
0.65
4.
Apple, Inc.
United States
0.65
5.
Roche Holdings AG
Switzerland
0.65
6.
IBM Corporation
United States
0.65
7.
Johnson & Johnson
United States
0.65
8.
Taiwan Semiconductor Manufacturing Co.
Taiwan, Province Of China
0.64
9.
Merck & Co. Inc.
10.
Kddi Corporation
Total
United States
0.63
Japan
0.63
6.48
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 Value Equity
Quarterly Commentary
Market Review
Developed equity markets ended the first quarter broadly flat which
disguised a very volatile start to the year. By mid-February global
markets had fallen sharply due to concerns about the strength of the
global economy. As has been the recent case 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 in our view 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 that further reinforced the recovery. Emerging
markets ended the quarter ahead of developed equities.
The first quarter of 2016 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 emerged. Since the mid-February low,
market performance has been broadening from the narrow cohort
of winners that dominated last year and has been led by previous
laggards. We believe that the momentum-driven market, which has
been a headwind to our performance in recent years, is at least
abating and perhaps even reversing.
The dominant performance of growth and defensive equities in recent
years has created many 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. To
mention just a few, we see significant opportunities in US industrials,
global banks and the UK market.
Performance and Strategy
The QEP Global Value strategy outperformed over the first quarter,
led by stock selection in emerging markets. We saw contributions
from a number of areas, notably resources (especially our holdings in
South African materials), as well as Asian technology and telecoms.
From a global sector perspective, stock selection across the cyclical
sectors of industrials, consumer discretionary and technology
boosted relative performance. Within the industrials sector our
holdings in the US, which we had been topping up over previous
months, performed particularly well. It was also holdings in the US
that contributed the most within consumer discretionary, particularly
in the retail and apparel industries. Avoiding weakness in unattractive
auto manufacturers in Japan and Continental Europe was another
positive for the strategy. Within technology we saw contributions from
all industries, particularly our preference for ‘mature’ stocks and our
avoidance of other, more ‘glamorous’ names.
A revival of the ‘reach for yield’ trade in US utilities and REITS was
a modest headwind to performance, two areas which we regard
as unattractive and hold a zero weight. 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
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. Within insurance we have added to some new
opportunities amongst our preferred high quality companies with a
focus on long-term business strength and diversity. We continue to
see a broad range of opportunities in the banking sector, from high
quality but over-sold simple banks in the US to lower quality but
recovering banks in Europe.
Amongst defensives we retain our preference for telecoms (outside
of the US) and global healthcare stocks (particularly European
pharmaceutical). US utilities and telecoms remain over-loved and
unattractive, in our view.
We maintain our holdings across a broad range of global
opportunities within cyclical sectors. Within consumer discretionary,
we prefer companies in well-established and shareholder-friendly
industries such as retail, media and auto component makers. In
technology, we continue to prefer traditional US companies and high
quality Japanese and Emerging Market stocks, over ‘excitable’ stocks
in areas like social media. In industrials, we have recently taken profits
after strong performance over the quarter but maintain our exposure
to attractively-priced, high quality opportunities, particularly within the
US defense and machinery industries.
In the energy and materials sectors we favor high quality companies
trading on depressed valuations. Diversified chemicals companies,
particularly in Japan, remain good value. In the mining industry, our
preference remains for larger, lower-cost, diversified producers.
Within energy, large integrated oil & gas stocks tend to offer attractive
dividend yields and strong balance sheets. We continue to avoid the
higher-cost producers, such as Canadian oil sands.
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 Value 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 Value
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 Value 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 active investment in diversified, indexunconstrained, Value 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. In December 2004 the
name of the Composite changed from ISU – Global Active Value to QEP – Global Value. This change does not affect the Composite history, investment decisions or strategy used.
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: 10-31-2004
Composite Creation Date: 12-21-2004
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 1.5%. Actual fees paid by institutional accounts
in the composite were less than this amount.
Dispersion: 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.
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 Value (the “composite”) has been
examined for the periods January 1, 2008 to December 31, 2014. The verification and performance examination reports are available upon request.
Composite Performance Results
Composite - QEP - Global Value
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
2008
2007
2006
2005
Gross Composite
Return
3.20%
25.59%
15.79%
-9.19%
16.24%
44.26%
-42.58%
5.97%
27.11%
13.15%
Net Composite
Return
1.68%
23.74%
14.07%
-10.53%
14.52%
42.13%
-43.43%
4.41%
25.23%
11.48%
As at Dec 2014
Annualized 3 Yea
Annualized 5 Yea
Annualized 7 Yea
Annualized 10 Yea
Annualized S.I 3
Gross Composite
Return
14.49%
9.64%
3.96%
7.18%
8.17%
Net Composite
Return
12.80%
8.02%
2.42%
5.59%
6.57%
Primary
Benchmark
Return
4.16%
22.80%
16.13%
-7.35%
12.67%
34.62%
-42.20%
11.66%
20.95%
10.84%
Primary
Benchmark
Return
14.10%
9.17%
2.72%
6.09%
6.94%
Secondary
Benchmark
Return
4.94%
26.68%
15.83%
-5.54%
11.76%
29.99%
-40.71%
9.04%
20.07%
9.49%
Secondary
Benchmark
Return
15.47%
10.20%
3.27%
6.03%
6.85%
3 Year
Composite
Risk 1
11.50%
15.32%
17.95%
23.13%
27.45%
25.73%
19.77%
9.79%
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%
24.84%
24.05%
22.66%
21.70%
18.22%
17.26%
8.77%
8.21%
n/a
n/a
n/a
n/a
Composite
Risk1
11.50%
15.11%
20.69%
18.11%
18.08%
Primary
Secondary
Benchmark Risk1 Benchmark Risk1
10.64%
10.37%
14.57%
14.30%
18.90%
18.35%
16.53%
15.99%
16.49%
15.95%
Number of
Portfolios
(throughout
period)
12 (11)
12 (12)
12 (10)
10 (9)
10 (8)
10 (8)
8 (7)
6 (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
Market Value at
end of Period
11,599,757,448
11,427,947,970
9,386,545,121
7,855,771,361
7,253,730,094
4,774,586,016
2,378,012,520
2,369,539,048
877,904,575
167,372,519
Fee Schedule
Net of fees composite returns are prepared by deducting a model fee based on the highest retail management fee of 1.5%. 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-QEPGAV
Average Account
Value at end of
Period
966,646,454
952,328,997
782,212,093
785,577,136
725,373,009
477,458,602
297,251,565
394,923,175
219,476,144
83,686,260
Percentage of
Firm Assets
4.10%
4.47%
4.19%
4.03%
3.57%
2.96%
2.65%
1.47%
0.70%
0.17%
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