Schroder Global Core Fund Wholesale Class. Overview. Performance to 30 June Fund characteristics as at 30 June Quarterly Report June 2018

Transcription

1 Overview Fund objective To outperform the MSCI World ex Australia Index (net dividends reinvested) before fees across a broad range of market environments with limited index-relative risk. The Fund provides the benefits of index-based investing from a risk and cost perspective with the advantage of relative performance upside potential through effective diversification and risk management. Key features Core approach offering the discipline of index investing with the potential for outperformance across most major environments. A fundamental basis stock selection is driven primarily by Value and Quality based strategies. Robust and differentiated investment process using innovative 'tree based' process based on how investors actually think rather than on traditional quantitative models fitted to past data. Sophisticated approach to risk management of sector, style, stock and market direction risk fully integrated into the investment process. Performance to 30 June 2018 Relative to MSCI World ex Australia Index Performance Calendar year Total returns (AUD %) Fund (Gross) MSCI World ex Australia Excess (Gross) Fund (Net) Excess (Net) 2018 YTD Performance Rolling periods Total returns (AUD %) 1 month 3 mths FYTD Fund (Gross) MSCI World ex Australia Excess (Gross) Fund (Net) 1 Year 3 Years Excess (Net) p.a. 5 Years p.a. 10 Years p.a. SI p.a.* SI cum* Past performance is not a reliable indicator of future performance. The difference between the fund and benchmark returns may not equal stated excess returns due to rounding. *Since inception from 31 October Fund characteristics as at 30 June 2018 ActiveShare NumHoldings Fund MSCI World ex Australia Index Active share 58.0% N/A Number of stocks 559 1,576 Beta* 0.98 N/A Tracking error* (ex-ante, p.a.) 0.94% N/A Source: Schroders. *Style Research. Page 1

2 Market and fund commentary Market review June 2018 In June, US equities were slightly higher but equity markets in most other regions declined as trade war concerns hurt risk appetites. In the US, the Federal Reserve ( Fed ) raised the target rate for Fed Funds by 0.25% as expected and marginally increased its 2018 forecasts for growth and inflation. A recovery in retail sales helped lift consumer discretionary names in June. However, the broader escalation in trade sanctions did sour risk appetites and lift traditionally defensive sectors, such as consumer staples, while financials and industrials were weaker. Bond proxies, namely US utilities and real estate stocks, also did well. Continental European equities saw negative returns in June. Consumer discretionary stocks fared particularly poorly with auto stocks coming under pressure given the trade sanction uncertainty, as US President Trump threatened tariffs on imported vehicles. The European Central Bank announced that it expects to end its quantitative easing programme in December 2018 and added that interest rates will remain at current levels through the summer of UK equities failed to make further progress over June, following strong performance over April and May. There was a rotation towards more defensive areas of the market amid a general increase in risk aversion, given rhetoric around a possible global trade war. Asian-exposed financials and miners underperformed, reflecting rising fears about the outlook for the region. Global equities advanced in the second quarter of 2018, as equity markets responded positively to economic and earnings data despite the ever-present geopolitical risk. Central bank policy remained a focus for investors. As expected, the Fed raised the target rate for Fed funds by 0.25%, while the European Central Bank announced that it expects to end its quantitative easing programme in December 2018 and that interest rates will remain at current levels through the summer of In the US, positive earnings momentum and supportive economic data outshone the China-US trade posturing to lift equities. Elsewhere, developed markets posted a positive quarter, with the UK in particular rising sharply as investors reduced their underweight in the country. However, markets were not immune to President Trump s protectionist rhetoric, as threatened tariffs on imported vehicles impacted the auto industry, notably in Europe. From a sector perspective, technology and consumer discretionary stocks continued their strong run from the first quarter, comfortably outperforming most other sectors. This was largely driven by the new economy cohort of stocks (in particular the FAANGs Facebook, Apple, Amazon, Netflix, Google), resulting in momentum and growth once again the dominant market drivers. The only sector to better them was energy, which benefited from further increases in the oil price. Page 2

3 Market and fund commentary (continued) Fund commentary Performance June 2018 June proved a challenging month for global equity markets as concerns over trade war hurt risk appetites. As such, we saw somewhat of a shift in market leadership with a rotation towards the more defensive sectors. However, at an individual stock level, many of the same mega cap growth companies that have dominated all year continued their strong run. As such, the Global Core strategy underperformed its benchmark. Our underweight in real estate and utilities detracted as bond proxies performed well throughout the month as investor risk appetite declined on talk of trade sanctions. Elsewhere in defensive sectors, our overweight positions in Asian telecoms also detracted, particularly within the integrated telecoms industry. Meanwhile, in technology, overweight positions in some of our favoured US semiconductor names detracted as the overall sector was negative over the month. Materials exposure also detracted as commodity prices (excluding oil) declined. In terms of positives, the strategy benefitted from overweight positioning within consumer staples which was the best performing sector across global markets having had a difficult year so far. Our underweight positions in the industrials sector, particularly within the US, also proved beneficial as the sector was the worst performer of the month. Energy positioning also added value as oil prices spiked towards the end of June despite suggestions that OPEC will increase oil production later this year. Performance The QEP Global Core strategy underperformed over the quarter, mainly driven by our holdings in the consumer discretionary, technology and financials sectors, most notably in the US. Within consumer discretionary, our underweight exposure to Netflix and Amazon, stocks that we do not favour on account of our business quality and valuation metrics, continued to detract. We also suffered from our overweight positions in the auto parts industry. However, this was offset in part by our overweight in more traditional UK retailers and apparel. Technology, where our preferred areas remain high quality "boring" companies with strong balance sheets, detracted from performance. Our underweight to Facebook weighed on returns, as the stock rebounded following Q1 s sell off. Meanwhile, overweight US IT services positions offset underperformance from some of our favoured semiconductor companies. Within financials, our overweight position weighed on returns as the sector was one of the worst performers over the quarter, particularly in the US. Offsetting this, to some extent, our Continental European underweight positioning proved beneficial. On the positive side, our overweight positions in the energy sector boosted performance, notably in the US as the oil price continued to rally through the quarter amidst demand dynamics and tensions in the Middle East. Elsewhere, our overweight positions in favoured US pharmaceutical and health provider stocks also proved supportive of returns. Page 3

4 Market and fund commentary (continued) Positioning The positioning of the strategy continues to reflect our view on where it is possible to find the best trade-off between valuation and business quality. At a sector level, our main overweight positions versus benchmark remain information technology and the defensive sectors of healthcare, consumer staples and telecoms. Our main underweight positions are financials, real estate, utilities and the consumer discretionary. Within consumer staples, we continue to favour home product and food & drink companies in the US and Europe, which offer both strong dividend yields and attractive valuations. Within healthcare, we continue to find attractive opportunities in US and European pharmaceuticals and US healthcare providers. In technology, our preferred areas remain high quality boring companies with strong balance sheets and rising dividends, and overlooked software developers. On a regional basis, we are slightly overweight UK whilst underweight Continental Europe, particularly the Eurozone area. Page 4

5 Attribution against MSCI World ex Australia Index Sector Energy Industrials Utilities Real Estate Telecommunication Services Health Care Consumer Staples Materials Consumer Discretionary Information Technology Financials Stock Selection (%) Asset Allocation (%) Region Emerging Markets Pacific ex Japan United Kingdom Continental Europe Japan North America Fund details as at 30 June 2018 Fund size A$1,497m APIR code SCH0003AU Redemption price Inception date 31 October 2002 Buy/Sell spread 0.15%/0.10% Distribution frequency Stock Selection (%) Asset Allocation (%) The attribution analysis shown above is intended to provide an indicative summary of the contributions to relative performance. The information is generated using Factset, a multi-currency performance analytical system. The total estimated sector and region performance attribution is reconciled with and adjusted to the reported official relative return. Normally twice yearly June and Dec Management costs 0.40% Page 5

6 Fund weights versus MSCI World ex Australia Index Sector Fund (%) Index (%) As at Jun Health Care Information Technology Consumer Staples Telecommunication Services Energy Materials Banks Industrials Consumer Discretionary Insurance & Asset Manager Real Estate Utilities Cash Active Weights Region Fund (%) Index (%) As at Jun Emerging Markets United Kingdom Pacific ex Japan Active Weights Japan North America Continental Europe Cash 0.9 Size Fund (%) Index (%) Active Weights As at Mega Jun Large Mid Small Micro 0.0 The difference between the fund and benchmark weights may not equal stated active weights due to rounding Schroder Investment Management Australia Limited Level 20 Angel Place, 123 Pitt Street, Sydney NSW 2000 Phone: Fax: (02) Investment in the Schroder Global Core Fund may be made on an application form accompanying the current Product Disclosure Statement, available from Schroder Investment Management Australia Limited (ABN AFSL ) ( Schroders ).This Report is intended solely for the information of the person to whom it is provided by Schroders. It should not be relied on by any person for the purposes of making investment decisions. Total returns are calculated using exit price to exit price, after fees and expenses, and assuming reinvestment of income. Gross returns are calculated using exit price to exit price and are gross of fees and expenses. The repayment of capital and performance of the Funds is not guaranteed by Schroders or any company in the Schroders Group. Past performance is not a reliable indicator of future performance. Unless otherwise stated the source for all graphs and tables contained in this report is Schroders. Opinions constitute our judgment at the time of issue and are subject to change. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation. For security reasons telephone calls may be recorded. Third party data is owned by the applicable third party identified above and is provided for your internal use only. Such data may not be reproduced or redisseminated and may not be used to create any financial instruments or products or any indices. Such data is provided without any warranties of any kind. Neither the third party data owner nor any other party involved in the publication of this document can be held liable for any error. The terms of the third party s specific disclaimers are set forth in the Important Information section at Page 6