Schroder International Small Cap
Strategy Fact Sheet – 1Q16
Strategy overview
Team highlights
The Schroder International Small Cap strategy has a core
investment style with a growth bias. The investment strategy uses
a bottom-up, fundamental, research-based approach. The portfolio
manager and analysts seek to identify those companies that have
compelling business models, strong management teams, attractive
valuation levels and favorable long-term growth prospects. The
portfolio of approximately 200 stocks is diversified by region,
country and type of company. It contains companies that typically
exhibit solid return and growth characteristics, stronger than
average balance sheets and cash flow attributes, and valuations
broadly similar to or below those of the universe.
– Lead portfolio manager with over 34 years investment experience
– Dedicated team of 21 professionals located in London, Tokyo,
Singapore, Seoul and Hong Kong
– The team draws on Schroders’ numerous firm-wide global
resources, including the large-cap Focus List analysts, Global
Sector Specialists and macro-economic research.
Key features
–
–
–
–
–
Bottom-up stock selection the primary source of added value
Focus on companies’ long-term growth prospects – approx. 3-year horizon
Undervalued securities with catalyst for appreciation to fair value
Rigorous risk management at the security and country level
Process and philosophy have remained stable since strategy launch in 1989
Composite performance
As of March 31, 2016
*Inception October 31, 2010
20%
†
The MSCI EAFE Small Cap Index is
an equity index which captures small
cap representation across Developed
Markets countries around the world,
excluding the US and Canada. With
2,170 constituents, the index covers
approximately 14% of the free floatadjusted market capitalization in each
country.
15%
Schroder International Small Cap (Gross)
Schroder International Small Cap (Net)
MSCI EAFE Small Cap Index†
9.96 9.08
10%
7.29
5%
2.87 2.05
0%
-1.74 -1.94
-0.60
6.41 5.56 5.58
8.21 7.35
7.15
3.20
-0.60
-1.74 -1.94
-5%
QTD
YTD
1 yr
3 yr
5 yr
Difference (Gross)
-1.15%
-1.15%
-0.32%
+2.67%
+0.83%
Annual S.I.*
+1.06%
Difference (Net)
-1.34%
-1.34%
-1.14%
+1.80%
-0.01%
+0.20%
2015
2014
2013
2012
2011
Gross
12.44%
-3.00%
34.10%
15.47%
-14.50%
Net
11.55%
-3.77%
33.04%
14.55%
-15.18%
MSCI EAFE Small Cap Index
9.59%
-4.95%
29.30%
20.00%
-15.94%
Difference (Gross)
+2.85%
+1.95%
+4.80%
-4.54%
+1.44%
Difference (Net)
+1.96%
+1.18%
+3.73%
-5.46%
+0.76%
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. Composite performance shown is for the MSCI EAFE Small Cap Composite.
All data and statistics as of March 31, 2016.
Schroder International Small Cap
Sector allocation (%)
Regional allocation (%)
Industrials
22.6
Consumer Discretionary
Financials
3.9
Health Care
Cash
Pacific ex Japan
22.5
13.3
9.7
Consumer Staples
Telecommunication Svcs
Emerging Markets
Cash 2.5
Continental Europe
6.6
8.8
8.5
8.3
7.3
7.5
Materials
Energy
20.1
16.3
14.8
Information Technology
Utilities
26.9
38.7
17.3
7.5
1.9
1.6
0.5
2.5
0.2
1.4
2.5
0.0
0
United Kingdom
Schroder International Small Cap
MSCI EAFE Small Cap Index
26.1
Japan
5
10
15
20
25
30
Source: Schroders as of March 31, 2016.
Source: Schroders, MSCI as of March 31, 2016.
Sectors/Regions listed are shown for illustrative purposes and are not to be considered a recommendation to buy or sell.
Portfolio & risk statistics
Schroder International Small Cap
MSCI EAFE Small Cap Index
201
2,167
2.10
2.26
14.09
12.21
Price to earnings ratio (trailing 12 months)
17.96
15.31
Price to earnings ratio (forward 12 months) 4
15.59
15.85
1.86
1.44
Tracking error (5 years)
2.54
-
Beta (5 years)7
0.96
-
Number of holdings
1
Weighted average market cap ($ billions)
2
EPS Growth (estimated 3-5 years)
3
5
Price to book (trailing 12 months)
6
Source: Schroders, MSCI as of March 31, 2016. 1. An average that takes into account the proportional relevance of each component, rather than treating each component equally.
Market cap is the market price of an entire company on any given day, calculated by multiplying the number of shares outstanding by the price per share. 2. The portion of a company’s
profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability. 3. 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. 4. A measure of a company’s financial leverage calculated by
dividing its total liabilities by stockholders’ equity. It indicates what proportion of equity and debt the company is using to finance its assets. 5. A ratio used to compare a stock’s
market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share. 6. The 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. 7. The annualized standard deviation of the active returns of a portfolio relative to the benchmark. 8. A mathematical measure of the sensitivity of rates of return on a portfolio
compared with rates of return on the market as a whole. A beta of 1.0 indicates that an asset closely follows the market; a beta greater than 1.0 indicates greater volatility than
the market.
Top ten holdings
1.
Helvetia Holding AG
Sector
Financials
Country
Switzerland
% of Total Market Value
1.32
2.
Interroll Holding AG
Industrials
Switzerland
1.31
3.
Ubisoft Entertainment SA
Information Technology
France
1.24
4.
Dalata Hotel Group Plc
5.
Smurfit Kappa Group Plc
6.
Techtronic Industries Co., Ltd.
7.
Cerved Information Solutions S.p.A.
8.
Elis SA
9.
Rubis & Cie SCA
10.
SPIE SA
Consumer Discretionary
Ireland
1.23
Materials
Ireland
1.23
Consumer Discretionary
Hong Kong
1.23
Financials
Italy
1.22
Industrials
France
1.18
Utilities
France
1.17
Industrials
France
1.15
Total
Source: Schroders, as of March 31, 2016.
Securities listed are shown for illustrative purposes and are not to be considered a recommendation to buy or sell.
12.28
Schroder International Small Cap
Quarterly Commentary
Market Review
International equities fell sharply to mid-February but rebounded
thereafter to end the quarter only modestly down in US dollar terms.
The actions of central banks and a recovery in the oil price were
important contributors to the market turnaround. Smaller companies
outperformed their large cap peers with the MSCI EAFE Small Cap
Index down 0.6% compared to the 3.0% fall of the MSCI EAFE
Index. Outperformance was driven by strong relative performance in
Japan and continental Europe.
European equities were impacted by global concerns early in the
quarter amid weaker Chinese data and the ongoing oil price slump.
Financials were the worst performers over the quarter with banks
falling amid concerns over the impact of negative deposit rates
on profitability. Equities in the United Kingdom followed a similar
V-shaped trajectory over the quarter. Smaller companies trailed
large caps overall despite outperforming strongly in financials. Their
lesser weight in energy as commodity prices rallied more than offset
this.
Japan was the weakest market in Q1 as falls in the first half of the
quarter were only partially offset by a moderate rebound in March.
Despite a volatile start to the year, Asia ex Japan equities delivered
the strongest Q1 returns.
Performance and Strategy
The International Small Cap strategy underperformed the index in
Q1. Underperformance was a result of stock selection only partially
offset by positive regional allocation. Regional allocation proved
beneficial due to our Emerging Markets exposure and underweight
to the United Kingdom. Stock selection detracted as the benefit from
positive stock selection in continental Europe was more than offset by
relative weakness in Japan and Pacific ex Japan.
most significant sectoral shortfalls were in consumer discretionary,
materials and industrials. Our stock picks in Pacific ex Japan also
detracted with weakness in health care and consumer discretionary.
By country, Australia was the notable area of weakness mainly from
our underweight stance. Our exposure to Emerging Markets made a
modest positive impact.
In the United Kingdom, stock selection was a modest detractor.
Negative selection in consumer discretionary was only partially offset
by good stock selection in health care and industrials. Our holdings
and the underweight in financials also proved beneficial.
Outlook
We believe that significant uplift in global economic activity is
unlikely. This is consistent with the longer-term framework within
which we are operating; continued low inflation, debt constraints
to growth in the developed world, and a more secular slowdown in
the trend of emerging market expansion, exacerbated by a degree
of over investment and credit expansion based on the “cheap
money” period post the Global Financial Crisis. This coincides with a
period of disruption and structural change which, as smallcap stock
pickers, we relish. We believe investors seeking genuine growth
opportunities should continue, or in some cases start, to take
smallcaps very seriously as an asset class which can buck some of
the deflationary stagnation trends facing investors in financial assets.
Needless-to-say, we believe this remains an environment where our
focus on visible and sustainable growth, sound balance sheets and
good corporate management should stand our portfolios in good
stead. Our only concern as regards absolute returns is that absolute
valuations are somewhat higher than average levels, although
should the growth in earnings we expect come through, they should
be supported.
Continental Europe was the only region in Q1 where portfolio
performance outpaced the index. Strong selection in industrials was
the main driver of outperformance with information technology a
lesser contributor. This was partially offset by negative selection in
financials, notably in Italy, and consumer staples.
Stock selection in Japan was the most significant detractor in
the quarter. The quarter was characterized by strength in REITs
where we lack exposure, and a degree of speculative activity in
stocks which generally do not meet our fundamental criteria. The
Source: Schroders
Important Information: Schroders is a global asset management company with $462.1 billion under management as of December 31, 2015. Our clients are major financial
institutions including banks and insurance companies, public and private pension funds, endowments and foundations, high net worth individuals, financial intermediaries and
retail investors. Our aim is to apply our specialist asset management skills in serving the needs of our clients worldwide and in delivering value to our shareholders. With one of
the largest networks of offices of any dedicated asset management company and over 420 portfolio managers and analysts covering the world’s investment markets, we offer
our clients a comprehensive range of products and services. Further information about Schroders can be found at www.schroders.com/us. Portfolio data and risk characteristics
based on a sample account. Details may vary from account to account. This document does not constitute an offer to sell or any solicitation of any offer to buy securities or
any other instrument described in this document. The information and opinions contained in this document have been obtained from sources we consider to be reliable. No
responsibility can be accepted for errors of facts obtained from third parties. Reliance should not be placed on the views and information in the document when taking individual
investment and/or strategic decisions. Schroders has expressed its own views and opinions in this document and these may change. Past performance is not a guide to future
performance. The value of investments can go down as well as up and is not guaranteed. Sectors/securities illustrate examples of types of sectors/securities in which the strategy
invested and may not be representative of the strategy’s current or future investments. Portfolio sectors/securities and allocations are subject to change at any time and should
not be viewed as a recommendation to buy/sell. The opinions stated in this document include some forecasted views. We believe that we are basing our expectations and beliefs
on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee that any forecasts or opinions will be realized. Schroder Investment
Management North America Inc. is an indirect wholly owned subsidiary of Schroders plc and is a SEC registered investment adviser and registered in Canada in the capacity
of Portfolio Manager with the Securities Commission in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec, and Saskatchewan providing asset management
products and services to clients in Canada. This document does not purport to provide investment advice and the information contained in this newsletter is for informational
purposes and not to engage in a trading activities. It does not purport to describe the business or affairs of any issuer and is not being provided for delivery to or review by any
prospective purchaser so as to assist the prospective purchaser to make an investment decision in respect of securities being sold in a distribution. Schroder Investment Management
North America Inc. (“SIMNA Inc.”) is an investment advisor registered with the U.S. SEC. It provides asset management products and services to clients in the U.S. and Canada
including Schroder Capital Funds (Delaware), Schroder Series Trust and Schroder Global Series Trust, investment companies registered with the SEC (the “Schroder Funds”.)
Shares of the Schroder Funds are distributed by Schroder Fund Advisors LLC, a member of the FINRA. SIMNA Inc. and Schroder Fund Advisors LLC are indirect, wholly-owned
subsidiaries of Schroders plc, a UK public company with shares listed on the London Stock Exchange. Schroder Investment Management North America Inc., 875 Third Avenue,
New York, NY 10022-6225, (212) 641-3800, www.schroders.com/us.
Schroder International Small Cap
Risk
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. Investments in small capitalization companies generally carry greater risk than is customarily associated with larger capitalization
companies, which may include, for example, less public information, more limited financial resources and product lines, greater volatility, higher
risk of failure than larger companies, and less liquidity.
Schroder MSCI EAFE Small Cap Composite
As of: December 31, 2015
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 MSCI EAFE Small Cap Composite (the “Composite”) is comprised of all Schroder Investment Management (UK & US), fully discretionary accounts which
seek to achieve returns above the MSCI EAFE Small Cap index by providing capital growth through investment in international small cap equities. The composite may also invest in
small cap equities in Emerging Markets. None of the accounts in the Composite use derivatives or leverage.
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
The composite’s creation date is 10-31-2010
The composite’s start date is 11-23-2010
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: The fee scale applied to the composite is 0.80% p.a.
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.
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. The verification report(s) are available upon request.
Verification assesses whether (1) the Firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis, and (2) the Firm’s policies and
procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.
Composite Performance Results
Composite - MSCI EAFE Small Cap Composite
Primary Benchmark - MSCI EAFE Small Cap (NDR)
Secondary Benchmark - n/a
Currency: USD
Gross Returns as of: Dec-31-2015
Firm: SIMNA
Year
2015
2014
2013
2012
2011
2010*
Gross Composite
Return
12.44%
-3.00%
34.10%
15.47%
-14.50%
8.08%
Net Composite
Return
11.55%
-3.77%
33.04%
14.55%
-15.18%
7.94%
Primary
Benchmark
Return
9.59%
-4.95%
29.30%
20.00%
-15.94%
7.64%
As at Dec 2015
Annualized 3 Year
Annualized 5 Year
Annualized 7 Year
Annualized 10 Year
Annualized S.I.3
Gross Composite
Return
13.51%
7.62%
n/a
n/a
9.00%
Net Composite
Return
12.61%
6.77%
n/a
n/a
8.13%
Benchmark
Return
10.44%
6.32%
n/a
n/a
7.63%
1
2
3
4
3 Year
Composite
Risk 1
10.85%
12.73%
15.90%
n/a
n/a
n/a
Composite
Risk1
10.85%
13.97%
n/a
n/a
14.52%
3 Year Primary
Benchmark Risk1
11.42%
13.51%
16.37%
n/a
n/a
n/a
Primary
Benchmark Risk1
11.42%
14.25%
n/a
n/a
14.95%
Number of
Portfolios
(throughout
period)
<5
<5
<5
<5
<5
<5
Account
Dispersion2
n/a
n/a
n/a
n/a
n/a
n/a
Market Value at
end of Period
n/a
375,063,839
259,803,500
193,532,948
100,930,361
118,052,777
Average Account
Value at end of
Period
n/a
125,021,280
129,901,750
96,766,474
100,930,361
118,052,777
Annualized standard deviation of gross monthly returns for the composite and monthly returns for the benchmark
Asset weighted standard deviation of annual gross returns of accounts that have been in the composite for the entire year
Since Inception
Since December 31, 2003 Total Firm Assets include non-fee paying accounts. 2003 Total Firm Assets value has been restated due to the inclusion of those non-fee paying accounts.
Total Firm Assets from 2007 incorporate the UK & US firm merger as detailed in the Definition of the Firm, from the start of 2011 Schroder Property Investment Management Multi
Manager accounts are included in the Total Firm Assets
* Returns are for a part period year
N/A - Information is not statistically meaningful due to an insufficient number of portfolios for the entire year
Source: Schroders
PFS-INTLSC
Percentage of
Firm Assets
n/a
0.13%
0.10%
0.09%
0.05%
0.06%
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