Schroder UK Dynamic funds

Transcription

1 Schroder UK Dynamic funds Citywire Wealth Manager Retreat October 2015 Paul Marriage Fund Manager John Warren Fund Manager October 2015 For professional advisers only. This material is not suitable for retail clients

2 09/10/ :12:32 The investment team Specialist and experienced Paul Marriage Fund Manager John Warren Fund Manager Steph Madgett Analyst Joined Schroders in July 2013 as part of the takeover having originally joined Cazenove Capital in 2005 Joined from Insight Investment where he was head of UK Small Cap investments Prior to this, he was an analyst at GH Asset Management. Paul graduated from University College, Oxford with a degree in Modern History Paul has over 19 years of investment experience Joined Schroders in July 2013 as part of the takeover having originally joined Cazenove Capital in 2010 Previously worked at UBS and Investec Bank and before this at PricewaterhouseCoopers where he qualified as a Chartered Accountant John graduated from Loughborough University with a degree in Economics and Accountancy John has over 15 years of investment experience Joined Schroders in June 2014 Previously worked as a Pan-European equity salesperson at UBS focussing on small and mid cap stocks Steph graduated from Brasenose College, Oxford with a degree in Classics Steph has over 5 years of investment experience Source: Schroders 1

3 09/10/ :12:32 One process, three products Long only and absolute return strategies Only UK small cap investors to run long only and long/short in parallel 50% overlap in hedge long book and long only Schroder Absolute UK Dynamic Fund* 240m Schroder UK Dynamic Smaller Companies Fund* 532m 861m managed in strategy Schroder AS UK Dynamic Absolute Return* 89m Source: Schroders. Fund sizes as at 31 August *From left to right funds previously called Cazenove UK Smaller Companies, Cazenove Absolute UK Dynamic and Cazenove UK Dynamic Absolute Return 2

4 Where are we in the small cap cycle It doesn t matter long-term outperformance Cumulative value with dividends reinvested of 1,000 1 January 1955 to m 4.9m 811k FTSE All-Share Index Numis SC Index Numis 1000 Index Total returns Schroder UK Dynamic Smaller Companies Fund Schroder AS UK Dynamic Absolute Return* FTSE SmallCap ex IT index Annualised returns since 1 January % +10.7% +5.9% Source: Numis/Elroy Dimson and Paul Marsh (LBS), as at 1 January 2014 Performance source: Morningstar, net income reinvested, annualised at 31 August *Performance shown for C Acc GBP share class, net of fees, NAV to NAV. Schroder AS UK Dynamic Absolute Return was launched in February 2014 to accommodate a transfer of shareholders from the Cazenove fund to the Schroder AS SICAV. Prior to 11 February 2014 the fund uses the track record of Cazenove UK Dynamic Absolute Return Fund (launched 16/05/2005) as a performance track record 3

5 Calendar year performance Consistency % One year to 29 Dec 2006 One year to 31 Dec 2007 One year to 31 Dec 2008 One year to 31 Dec 2009 One year to 31 Dec 2010 One year to 31 Dec 2011 One year to 31 Dec 2012 One year to 31 Dec 2013 One year to 31 December 2014 YTD to 31 August Schroder UK Dynamic Smaller Companies A Acc FTSE Small Cap (ex IT) TR IMA UK Smaller Companies Schroder AS UK Dynamic Absolute Return Source: Schroders, as at 31 August 2015, Performance for A Acc share class, bid to bid net of fees in GBP Past performance is not a guide to future performance and may not be repeated.

6 How do you consistently pick small caps Limit risk and focus on long-term winners Investment universe: Numis index including AIM ex IT c.1,500 stocks P3M No mining, no oil and gas Only UK/UK exposure No loss makers Product differentiated product, R&D backed, IP preferred Market market leader in chosen niche Margin ability to grow the margin and generate cash Now c.800 companies to consider Management stock ownership, shareholder value Source: Schroders. Sectors shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell 5

7 Hitting the sweet spot Invest in core smaller companies 6.4% 2.4% 19.1% 40.1% 30.6% 89.9% < 50m 50m 500m > 500m 50m 100m 100m 250m m Source: Schroders, as at 31 July

8 09/10/ :12:34 Lower market cap = lower valuation Good opportunities < 250m 22x 20x 18x 16x 14x 12x 10x 8x FTSE 100 FTSE 250 FTSE Small Cap FTSE AIM All-Share 6x 100bn 5bn 500m 20m 2bn 20m FTSE All Share stocks in mkt cap order AIM Stocks in mkt cap order Source: Liberum, September

9 Long-term alpha generation Significantly enhanced by good stock picking Since FM inception Schroder UK Dynamic Smaller Companies Fund FTSE Small Cap ex Investment trusts IMA UK Smaller Companies Source: Financial Express Analytics. Total return, bid to bid, net of fees, as at 31 August A Acc share class. Up until 24 March 2014, the fund was called Cazenove UK Smaller Companies Fund. Past performance is not a guide to future performance and may not be repeated 8

10 May 05 Oct 05 Mar 06 Aug 06 Jan 07 Jun 07 Nov 07 Apr 08 Sep 08 Feb 09 Jul 09 Dec 09 May 10 Oct 10 Mar 11 Aug 11 Jan 12 Jun 12 Nov 12 Apr 13 Sep 13 Feb 14 Jul 14 Dec 14 May 15 Schroder UK Dynamic Absolute Return funds - why invest? Risk return reward consistent delivery Annual return % 12% 10% 8% 6% 4% 2% 0% HFRI Equity Market Neutral Schroder AS UK Dynamic Absolute Return HFRI Equity Long/Short HFRI Fund of Funds JPM World Gov Bonds MSCI World FTSE All Share 0% 2% 4% 6% 8% 10% 12% 14% 16% Annual volatility Source: Schroders, Datastream and HFRI, as at 31 August Past performance is not a guide to future performance and may not be repeated. 9 Schroder AS UK Dynamic Absolute Return* FTSE All Share TR UK Interbank 1 Week LIBID

11 How do you generate absolute returns Limit risk and don t take big directional bets LONGS Small and mid-cap bias with strong commonality with long-only fund by name Position sizing typically same as in long only Additional exposure to mid caps we know well All-cap mandate Opportunistic large cap trades to add beta Basket of familiar trading names SHORTS Keep short book in place at all times Futures and options to provide strong capital protection in market drawdown Single stock shorts based on Small cap read-through High-beta large caps Lower risk by Avoiding heavily shorted names No liquidity risk Source: Schroders. 10

12 Portfolio allocation by market cap Long book Short book 18.6% 25.2% 8.0% 41.7% 58.3% 14.6% 33.7% 0 250m 250m 500m 500 1,000m 1,000 2,500m > 2,500m Source: Schroders, as at 31 August

13 Fund performance in market drawdowns Consistent capital protection 10 worst market monthly drawdowns vs. fund Jan 08 Jun 08 Sep 08 Oct 08 Jan 09 Feb 09 May 10 Aug 11 May 12 Jun 15 FTSE All Share Schroder AS UK Dynamic Absolute Return Source: Schroders, September Past performance is not a guide to future performance and may not be repeated. 12

14 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Schroder AS UK Dynamic Absolute Return Exposures Average net exposure (%) Average gross exposure (%) Average net exposure beta adjusted (%)(lhs) Average gross exposure (%)(rhs) Source: Schroders, as at 31 August Performance shown for C Acc GBP share class, net of fees, NAV to NAV. *Strategy launched in May 2005 Past performance is not a guide to future performance and may not be repeated. 13 Since launch* Volatility (% pa) 7.4 Net performance 183.3% Correlation with FTSE All share 0.32 Net annualised return 10.7% Sharpe ratio 1.2 Strategy AUM 329m

15 Major holdings Holding name Market cap No. years held Analyst coverage Cal 16 P/E Cal 16 EPS growth Cal 16 Net Debt / EBITDA *YTD earnings momentum Johnson Service Group 292m x 3.2% 0.9x Smart Metering Systems 290m x 15.9% 2.8x BPI 201m x 4.3% 0.5x Arrow Global 493m x 28.6% 2.1x UNCH Clinigen 786m x 21.0% 1.2x Source: *Green arrow reflects 10%+ upgrade, Blue arrow less than 10% upgrade. * Smaller Companies Fund only. ^Long short funds only Schroders, as at 25 August The securities shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell 14 Wincanton * 256m x 7.5% 0.4x Sepura 321m x 17.0% 1.5x Fevertree 496m x 16.2% 16m cash VP Group* 287m x 6.6% 1.1x Treatt * 83m x 8.8% 1.3x Xaar 416m x 12.5% 75m cash Booker ^ 3,090m x 10.8% 200m cash UNCH

16 Appendix

17 09/10/ :12:34 Where are we in the small cap cycle? 1 year FTSE Small FTSE 100 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep UKX Index SMXX Index Source: Bloomberg, as at September

18 09/10/ :12:34 Where are we in the small cap cycle? 10 years FTSE Small FTSE Source: Bloomberg, as at September UKX Index SMXX Index

19 Where are we in the small cap cycle? Valuations remain supportive UK market: 12m forward index P/E relatives May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May Mid v 100 Small v 100 Source: Peel Hunt, as at August

20 09/10/ :12:34 It s a small world % sales by destination UK 53% EMEA 19% Americas 12% Asia/RoW 16% Source: Schroders, ex cash, 31 July Countries shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell 19

21 Schroder AS UK Dynamic Absolute Return performance summary Jan Feb Mar April May June July Aug Sep Oct Nov Dec Annual Fund % Index % Fund % Index % Fund % Index % Fund % Index % Fund % Index % Fund % Index % Fund % Index % Fund % Index % Fund % Index % Fund % Index % Fund % *Index % Source: Schroders, as at 31 August Performance shown for C Acc GBP share class, net of fees, NAV to NAV. Schroder AS UK Dynamic Absolute Return was launched in February 2014 to accommodate a transfer of shareholders from the Cazenove fund to the Schroder AS SICAV. Prior to 11 February 2014 the fund uses the track record of Cazenove UK Dynamic Absolute Return Fund (launched 16/05/2005) as a performance track record. *FTSE All Share index Past performance is not a guide to future performance and may not be repeated 20

22 09/10/ :12:34 Important information For professional advisers only. This material is not suitable for retail clients. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Schroders has expressed its own views and these may change. The data contained in this document has been sourced by Schroders and should be independently verified before further publication or use. This presentation is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Unit Trusts Limited (Schroders) does not warrant its completeness or accuracy. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Schroder Absolute UK Dynamic Fund: Typically, UK authorised collective investment schemes invest on a 'long-only' basis. This means that they will rise (or fall) in value based on the market value of the assets they hold. By employing synthetic shorting techniques, this fund will establish both 'long' and "short" investments. As a result, as well as holding assets that may fall or rise with market values, it will also hold positions that will rise in value as the market falls and fall in value as the market rises. Therefore, this fund is referred to as a 'long/short' fund. The fund will primarily invest in UK shares or derivatives thereof. This presents investors with some concentration risk. Moreover, as it invests in shares the fund may be more volatile than funds investing in bonds, but that may also offer greater potential for growth. The fund may use derivatives and forward transactions for investment purposes. This involves special risks which may significantly raise the risk profile of a fund and increase its volatility when taking additional market or securities exposure. Further information on the performance fee and risks of the fund can be found in the full Prospectus and Key Investor Information document. The levels and bases of tax assumptions may change. Schroder UK Dynamic Smaller Companies Fund The historic yield reflects distributions declared over the past 12 months as a percentage of the mid-market unit price, at the date shown. It does not include any preliminary charge and investors may be subject to tax on their distributions. The fund primarily invests in equities and as such tends to be more volatile than a fund investing in bonds, but may also offer greater potential for growth. The value of the underlying investments in equity funds may fluctuate quite dramatically in response to the activities and results of individual companies, as well as in connection with general market and economic conditions. This is a specialist fund, which invests in small, less liquid companies. The fund is likely to provide a higher level of volatility and thus may carry increased risk. The levels and bases of tax assumptions may change. Schroder AS UK Dynamic Absolute Return Fund: The capital is not guaranteed. All equity forward sales are with a single counterparty. In case of default, the relevant equities will be sold in the market and this may affect performance. The fund may hold indirect short exposure in anticipation of a decline of prices of these exposures or increase of interest rate. There is no guarantee that a financial derivative contract will achieve its intended outcome, even if the terms of the contract are completely satisfied. This presentation does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder Alternative Solutions (the Company ). Nothing in this presentation should be construed as advice and is therefore not a recommendation to buy or sell shares. The offering of shares in certain jurisdictions may be restricted and accordingly persons are required, by the Company, to inform themselves of and observe any such restrictions. Applications for shares of the Company can only be made on the basis of the Key Investor Information Document and current prospectus, together with the latest audited annual report and subsequent unaudited semi-annual report, if published, copies of which can be obtained, free of charge, from Schroder Investment Management (Luxembourg) S.A. Source of ratings: Trustnet, Morningstar, Square Mile, Ranger Spencer Mills, as at 31 August 2015 Issued in October 2015 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No: England. Authorised and regulated by the Financial Conduct Authority. UK