Schroders goes dynamic in low-cost range

19 August 2011 10:20 am

Type: Unit trust fund of funds

Aim: Growth and income by investing in a multi-asset portfolio comprising global equities, commodities, emerging market debt, global high yield and other fixed income securities mainly through investment funds

Minimum investment: Lump sum £1,000, monthly £50

Investment split: 22.5% global equities, 15.1% commodity & energy, 14.7% fixed interest, 8.9% global emerging market fixed interest, 8.7% US equities, 4.9% Asia Pacific ex Japan equities, 4.6% global emerging market equities, 4.1|% UK equities, 4% Europe ex UK equities, 3.2% alternative assets

Isa link: Yes

Charges: Annual 1.2% for A shares, annual 0.45% for D shares

Commission: Fee agreed between adviser and client

Tel: 0800 718 777

Schroders has added the dynamic multi-asset fund to its low-cost fund range by restructuring its diversified target return fund.Chelsea Financial Services head of research Juliet Schooling Latter says: “This is the third fund in the new low-cost range that Schroders has launched. The aim is to provide investors with a low-cost multi-asset strategy, with the focus on asset allocation. “

Scholling Latter points out that the idea is to combine active asset allocation, with the use of lower-cost passive funds to reduce charges. She adds that it also aims to have low volatility – half to two thirds of global equity volatility. It also has a target return of 4 per cent a year above the Consumer Price index, net of fees. “So far, so good – as a concept I cannot fault it. It offers diversification by investing in various different strategies: global equities; commodities; emerging market debt, fixed interest and fixed income derivatives. Although it does strike me that property seems to be missing from the mix,” says Schooling Latter.

Assessing the credentials of the management team, Schooling Latter says: “Schroders has a big, worldwide multi-asset team of 60. The fund manager, Johanna Kyrklund, and her team have a good track record utilising a global asset allocation strategy, producing an average return of 6 per cent a year over the last three years.” Schooling Latter feels that Kyrklund has been given reasonable latitude with regard to asset allocation. “For instance, the equity portion of the fund can range between 20-50 per cent. It is just difficult to tell at this stage how actively managed the fund will be. Certainly if Kyrklund and her team employ the full range of their parameters they should be able to boost performance.”

Schooling Latter says that at a time of negative real return on cash, an increasing number of savers are looking for a more effective way to invest. “This fund looks like an interesting option as a core holding for a client who is taking their first step into equity investment.” But one of the potential drawbacks is that Schooling Latter wonders whether some first-time investors might find the breadth of strategies perplexing.

Summing up, Schooling Latter says: “I lean towards actively managed funds and you could argue that this fund is actively managed, at least via asset allocation. I just wonder whether greater outperformance would be achieved if the fund held active, rather than passive funds within that asset allocation.

“Then again, it would defeat the low-cost purpose of Schroders’ new suite of funds. Only time will tell whether this new fund range is popular with both investors and advisers alike.”

BROKER RATINGS

Suitability to market: Good

Investment strategy: Good

Charges: Good

Adviser remuneration: Average

Overall: 7/10

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