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Alternative thinking pays off at Schroders

Schroders’ multi-manager team says its holdings in alternative asset classes, including property, private equity and hedge funds, have achieved the best returns in recent weeks.

The team has been making some slight changes to its portfolios, reducing cash by about 4 per cent across each fund to increase weightings in equities, European property and hedge funds.

Schroders is positive on the two hedge funds it holds but says Close all blue, which inv-ests mainly in fixed interest, has performed better than Dexion absolute.

The firm says opportunities in equities, as a result of bad news being priced in by the market, are making it possible for Schroders’ underlying managers to buy at valuations that would not have been possible two years ago.

Despite a backdrop of diffi-cult market conditions, Schroders’ holdings in property and private equity performed well as the market recognised that some were trading on excessive discounts.

The strongest performers were Matrix European real estate and Invista European. Schroders says the European property market is not as stretched as the UK as it never had the price anomalies seen in the UK.

Discounts have been so wide on some trusts that Schroders believes it is reasonably safe to buy into them.

Electra and Hg Capital have made positive contributions in Schroders’ allocation to private equity. Both holdings have a lot of cash and chose to sell rather than buy during last year’s frenzied period of private equity bids.

Head of multi-manager Andrew Yeadon says: “Hg Capital is interesting as it is a specialist in mid and small cap buyouts, which I think is the sweet spot for private equity. Unlike some, it is a relatively small specialist manager.

“A year ago, people would have said it was too conservative because it held lot of cash and has been into realising rather than buying but now private equity bids have eased and the market is more conducive to buying.”

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