Schroder Wholesale Australian Equity Fund
About this fund
With an established pedigree of investing in Australian equities for over 40 years, the Schroder Wholesale Australian Equity Fund provides exposure to a range of quality Australian stocks characterised by strong returns on capital and a sustainable business franchise offering pricing power and control over business direction.
Stocks are identified using bottom-up, fundamental analysis undertaken by Schroders' experienced and stable team of in house analysts. The Schroder Wholesale Australian Equity Fund draws on both local and global research capabilities. With a long term focus on investing, it is suitable as a core portfolio holding over a time frame of 3 - 5 years.
What is this fund's investment objective?
To outperform the S&P/ASX 200 Accumulation Index over the medium to long term (3 - 5 years).
What is this fund's investment process?
The core of Schroders' investment philosophy is that corporate value creation, or the ability to generate returns on capital higher than the cost of capital, leads to sustainable share price outperformance in the long term. The ability to generate superior returns is a function of industry dynamics and company competitive advantage.
The investment process is a combination of qualitative industry and company competitive position analysis and quantitative financial forecasts and valuations as follows:
Step 1: Stock filtering and coverage
Schroders expect to maintain direct coverage of all stocks within the S&P/ASX 200 Index, as well as a significant number of stocks not included in this index.
Step 2: Financial modelling
Companies are subject to detailed analysis using a standardised proprietary company financial model. The model consists of a detailed profit & loss statement, cash flow statement, balance sheet and forecast assumptions. Analysts also have the flexibility to add additional information they believe pertinent to any company. External meetings form an important part of the company assessment.
Step 3: Industry and business quality assessment
An assessment of current and future key industry drivers, the level of industry returns and company specific reasons for relative success within an industry is quantified into financial forecasts of sustainable margins and returns.
Step 4: Detailed company valuation
Companies within the investment universe are subject to a standardised 'sum of the parts' and/or discounted cash flow ('DCF') valuation methodology where financial statements are forecast forward three years to reach a 'mid-cycle' or sustainable level of earnings, margins and returns. This determination of the 'mid-cycle' or 'sustainable level' is a function of the industry and business quality assessment.
Step 5: Business and financial risk assessment
Schroders assess the sensitivity of a company's cash flow to key 'macro factors' such as interest rates together with the impact of financial leverage and capture this information in our database. They believe that these factors are a key risk consideration when constructing a portfolio as opposed to only looking at returns based volatility measures (i.e. tracking error).
Step 6: Portfolio construction
Portfolio construction aims to maximise expected returns, whilst maintaining diversification and skewing the portfolio to high quality companies. Analysts take an active role in the consideration of portfolio inclusions, exclusions and relative weights with final positions the responsibility of the Portfolio Construction Committee.
Important information
Investment in the Schroder fund(s) may be made on an application form in the current Product Disclosure Statement (PDS) which is available from Schroders' (ABN 22 000 443 274, AFS Licence 226473) website www.schroders.com.au. The information contained above is general information only. It does not contain and should not be taken as containing any financial product advice or financial product recommendations. Before acting on the information contained above you should obtain a copy of the PDS and consider the appropriateness of the information in regard to your objective, financial situation and needs before making any decision about whether to invest, or continue to hold. The repayment of capital and performance in the Fund is not guaranteed by Schroders or any company in the Schroders Group. Opinions constitute our judgement at the time of issue and are subject to change. Past performance is not an indicator of future performance. Investment guidelines represented are internal only and are subject to change without notice. For security reasons, telephone calls may be taped.
