North American Equity Fund. Quarterly Investment Report

Transcription

1 North American Equity Fund Quarterly Investment Report As of September 30, 2018

2 Overview Fund objective The Fund seeks long-term capital growth. Fund valuation Total net assets (all share classes) Fund Value at June 30, 2018 $1,098,189,373 Fund Value at September 30, 2018 $1,030,618,012 Source: SEI. Performance Periods to September 30, 2018 Total returns (%) QTD Since Inception Fund (Investor net of fees) S&P 500 Index Relative Performance Source: SEI, Schroders. Inception Date: September 17, Performance versus benchmark (%) QTD Since Inception Fund (Investor) S&P 500 Index Calendar year performance (%) YTD Investor Shares (net of fees) S&P 500 Index Source: SEI, Schroders. Performance shown reflects past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance shown. Principal value and investment returns will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For the most recent monthend performance, visit or call (800) Performance for periods less than one year is not annualized. Total fees and expenses as shown in the Fund s prospectus: 0.33% Total return figures are net of fees and expenses and reflect reinvestment of all dividends and distributions at net asset value. As described in the prospectus, during certain periods shown the expenses borne by the Fund were limited by the investment adviser; otherwise total return would have been lower. 2

3 Performance attribution Sector* 3 months ending September 30, 2018 relative to S&P 500 Index *Contribution to performance is relative to the S&P 500 Index, and is presented gross of fees. Industrials Financials Staples Energy Telecoms Utilities Health Care Materials Cons Disc Tech Stock Selection (%) Asset Allocation (%) 12 months ending September 30, 2018 relative to S&P 500 Index Industrials Health Care Energy Utilities Cons Disc Staples Materials Telecoms Financials Tech Stock Selection (%) Asset Allocation (%) The attribution results shown measure the overall impact of sector allocation decisions during the indicated periods and should not be viewed as an investment recommendation. Portfolio holdings and sector weights can change at any time and historical impacts are not necessarily a guide to future impacts. Attribution disclaimer: The above data was sourced from FactSet which uses bottom up methodology whereby constituents of both the index and the Fund are priced at the same point in time thus removing timing differences. FactSet returns do not take into account Transaction costs or Management fees. FactSet assumes trades go through at closing prices rather than the actual price that may have been traded at during the day. The accounting data used by FactSet is un-audited, whereas the data used for actual fund performance is audited, therefore any subsequent cleaning of data will not be reflected in FactSet. Past performance is no guarantee of future results. The value of an investment can go down as well as up and is not guaranteed. 3

4 Performance & Market Review US equities continued to steadily advance during the third quarter as record corporate earnings offset uncertainty surrounding global trade wars and the confident pace of US policy tightening. One of the clearest themes was the dominance of the US market as the relative performance of the US versus the rest of the world reached its most extreme level since at least the early 1970s. In contrast to the recent pattern, this was not concentrated in a handful of market darlings and there were actually tentative signs of a rotation in investor sentiment. In particular, the narrow cohort of large cap US growth stocks appear to be fragmenting and the association of market leadership with this group is weakening. The other emerging theme was the increased preference for defensive equities with out-of-favor healthcare and telecom stocks becoming some of the best performers during the quarter. Investors took the widely anticipated tightening by the US Federal Reserve in their stride but greater confidence in the pace of future rate hikes pushed the 10-year Treasury yield convincingly above the 3% level. Bucking the broader leaning towards defensives, US industrial stocks performed well, reflecting a renewed interest in recent laggards as well as a less dominant US dollar. The Fund benefited from the modest rotation in sentiment and outperformed the benchmark during the quarter. As healthcare stocks continued to recover, long held positions in US pharmaceutical stocks were notable tailwinds. Positioning across consumer staples, particularly within food & drink, also contributed positively. Our low weights in utilities and real estates were vindicated by it being one of the worst performing sectors during the quarter as interest rate rises were a drag on many dividend payers, particularly the lower quality stocks. The re-emergence of the US growth theme in August following a brief reprieve in July, detracted to the Fund s performance, notably in the consumer discretionary and technology sectors. Outlook and Policy The positioning of the fund continues to reflect where we have identified the best trade-off between valuation and business quality. At a sector level, our main overweight positions versus benchmark are information technology, healthcare, and consumer staples while we are underweight consumer discretionary, real estate and utilities. Despite their recent gains, we continue to find attractive opportunities in US pharmaceuticals and US healthcare equipment and providers. In technology, our preferred areas remain high quality boring companies with strong balance sheets and rising dividends as well as overlooked software developers. We decreased our position to consumer staples over the quarter by trimming positions in recent outperformers. In contrast, we increased our position in resources which have benefited from improving fundamentals. 4

5 Information Technology Health Care Consumer Staples Banks Energy Telecommunication Services Industrials Insurers/Asset Mgt Materials Consumer Discretionary Utilities Portfolio analysis Fund weightings Market capitalization (%) Source: Schroders, QEP Investment Team Classification. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Mega-cap >US$20bn Large-cap US$5bn to US$20bn Mid-cap US$1bn to US$5bn Small-cap US$250m to US$1bn Micro-cap <US$250m Fund S&P 500 Index Sector (%) Market capitalization and sectors weights are subject to change and should not be viewed as an investment recommendation. 30% 25% 20% 15% 10% 5% 0% Fund S&P 500 Index Largest industry positions versus the S&P 500 Index (% active weights) as of September 30, 2018 Industry weights shown are subject to change at any time, are not necessarily indicative of current or future weights and should not be viewed as an investment recommendation. Pharma 2.3 Cmplx Bank Home Prod Machinery L&H Insur Defence & Aero Smpl Bank Health Equip. Electric Util Source: Schroders, QEP Investment Team Classification. 5

6 Fund statistics Fund Benchmark Active share (Index = 0%) 35.2% n/a Weight in non-index stocks 8.2% n/a Tracking error (ex-ante)* 0.9% n/a Number of stocks Company market cap 253, ,170 Source: Schroders, S&P. *Tracking Error from Style Research. 6

7 Important Information Please consider a fund s investment objectives, risks, charges and expenses carefully before investing. For a free prospectus, which contains this and other information on any Schroders fund, visit call your financial advisor or call (800) Read the prospectus carefully before investing. Definitions: The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Investors can not invest directly in an index. Active share is a measure of the percentage of stock holdings in a portfolio that differ from the benchmark. Tracking error (ex-ante) is the annualized standard deviation of the active returns of a portfolio relative to the benchmark. Company market cap is the total value of the tradable shares of a publicly traded company; it is equal to the share price times the number of shares outstanding. The views and opinions contained herein are those of the Schroders QEP team, and do not necessarily represent Schroder Investment Management North America Inc. s house view. These views and opinions are subject to change. All investments involve risks including the risk of possible loss of principal. The market value of a fund's 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. Please see the prospectus for a full description of the risks associated with the Fund. 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 making individual investment and/or strategic decisions. The opinions stated in 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. Sectors/securities illustrate examples of types of sectors/securities in which the Fund invested and may not be representative of the Fund'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. Countries mentioned are shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. The Fund s investment adviser and sub-adviser are Schroder Investment Management North America Inc. ( SIMNA ) and Schroder Investment Management North America Ltd., respectively. Each are wholly-owned, indirect subsidiaries of Schroders plc (collectively referred to as Schroders herein), a UK-based company with shares listed on the London Stock Exchange. The Fund is distributed by SEI Investments Distribution Co ( SIDCO ), a member of FINRA. Schroder Fund Advisors LLC, a subsidiary of SIMNA and a member of FINRA, previously served as the distributor of the Fund and continues to be involved in the distribution of its shares through an agreement with SIDCO. SIDCO is not an affiliate of Schroders plc. QIR-QEPNAE 7