The new fund will complement the existing Schroder S&P high alpha fund, an aggressively managed fund, and the Schroder S&P strategic balanced fund which is more conservative. It aims for income and growth and its target is to outperform the Lipper cautious managed sector by 1.5 per cent after charges.
S&P monitors over 100,000 funds and writes detailed reports on the best 1,200 of these by sector. Although its research is widely available to other investment houses, it provides an exclusive service to Schroders multi-manager team, which is headed by Andrew Yeadon. S&P provides the team with a shortlist of 200 funds selected to suit their specific requirements and this will be combined with the teams own research.
To manage risk in the portfolio, the multi-manager team relies on computer software called Prism, which allows them to see what would happen if the fund weightings were altered.
Like the other funds in the range, the cautious fund has the ability to invest in alternative investments such as property, private equity and hedge funds under the Ucits III directive. Investors can choose income units which pay income on a quarterly basis, or they chose to make regular withdrawals from 50. These can be paid on a monthly, quarterly or half yearly basis up to a maximum of 7.5 per cent of the fund value each year.
The ability to take income or make regular withdrawals from the fund to produce an income is a useful feature for a cautious fund. However, regular withdrawals from a fund with a relatively concentrated portfolio need to be sustained by strong performance, with less leeway to carry weaker funds.