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A global equity fund that is managed with a disciplined, value style. The approach is based upon identifying companies that have suffered a significant operational and/or share price setbacks but have the potential to recover over time. Within its sector, the fund features in our 'All-Cap, Value' category.
The fund’s KIID Synthetic Risk and Reward Indicator (SRRI) is 6. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 6 means the fund’s historic volatility is between 15% and 25%.
The fund’s risk characteristics are illustrative of its differentiated nature and the requirement for investors to be prepared for periods of shorter-term struggles, as well as bursts of strong returns. Its five-year realised standard deviation is above that of global equity benchmarks and its maximum drawdown has also been larger. We believe these characteristics are a fair reflection of the profile that investors should expect. Different share classes could have differing SRRI scores.
The fund is managed by Simon Adler and Liam Nunn. Nick Kirrage heads the Global Value team and has managed assets in the value style at Schroders since 2006. Mr Adler has managed value portfolios at Schroders since 2016. Mr Nunn joined the Global Value team in 2019, becoming deputy manager in 2020 and then co-manager in November 2022. The Global Value team consists of several fund managers who run value and income-orientated portfolios across UK, European, global and emerging markets. They benefit from Schroders’ extensive resources.
Contrary to prevailing wisdom, the team believes that stock markets are inefficient because market participants do not always behave in a rational way, and often extrapolate short-term trends, both good and bad. Furthermore, they believe that investors often underestimate the potential for mean reversion in earnings. Therefore, the focus of their approach is the identification of mis-priced securities where they see the potential for a recovery in profits, however challenging the backdrop may appear.
Fund positioning is not constrained by the benchmark. The fund is invested in a minimum of 30 stocks. No more than 10% is invested in any one stock or 35% in any one sector. There is a maximum limit of 50% in any one country and the fund is permitted to hold up to 10% in cash. Exposures to currencies other than sterling are not hedged back to sterling.
The approach is framed by the identification of stocks that are trading at a substantial discount to their long-term fair or intrinsic value and where they believe that profit growth will surpass expectations.
The process starts with several quantitative screens designed to help identify potential candidates. Price relative to 10-year average earning is a key screen, but they also look at other metrics including enterprise value, net operating profit after tax and price / tangible assets. The screens narrow the investable universe into a subset of undervalued companies that are candidates for proprietary research by the team. The managers then construct a financial model for each company. This is based on at least 10-years’ worth of company accounts to help understand how a firm has performed through a full economic cycle. Their analysis of these companies focuses upon the nature of their business models, balance sheets and capital allocation decisions. The balance sheet analysis is designed to ensure the business can survive further adversity, while the business model assessment helps the managers judge the factors that will drive a turnaround and understand the potential extent of any such improvement in profitability. The team can then complete the “7 Red Questions” checklist. This checklist framework is designed to uncover value traps and address key investment risks in a disciplined and repeatable way. The information and analysis gleaned from each of the questions feeds into the overall assessment of whether or not the risk/reward trade-off is attractive for a given company.
Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.
At The Adviser Centre, our primary aim is to support financial professionals in their fund selection and suitability work through independently-minded research, borne of decades of industry experience. Our process is framed by the fundamental concepts of “quality”, “value” and “utility”, through which we answer the key questions of why to invest in a fund, how it is likely to behave and how it can be deployed.
The Adviser Centre team members are some of the most experienced in the fund research industry. We can always look forward to robust and constructive discussions and we have great respect for their views and perspectives, which, given the breadth of their fund and market knowledge, come from an extremely well-informed position.
We have known and worked with the team for several years and we value their experience and the insights they provide to our own investment process. The service differentiates itself by its more focused nature and the information on their factsheets is useful in emphasising a fund’s key mandate, exposure and style biases, helping to explain the risk/return journey that our customers can expect.
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