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Schroders takes smid path


Schroder US Small & Mid Cap Fund

Type: Unit trust

Aim: Growth by investing in small and mid capitalisation US companies

Minimum investment: Lump sum 1,000

Investment split: 20% consumer discretionary, 19% healthcare, 14.1% producer durables, 12.4% financial services, 9.1% technology, 6.4% materials and processing, 5.8% utilities, 4.7% other energy, 3.6% integrated oils, 3.2%, consumer staples 1.7% auto and transportation

Isa link: Yes

Pep transfers: Yes

Charges: Initial 5.25%, annual 1.5%

Commission: Initial 3%, renewal subject to negotiation, 0.5% for Isas and Pep transfers

Tel: 0800 718777

French & Associates managing director Keith French feels there is a gap in the market for this type of fund as there are only a few funds which offer exposure to the small and mid cap area. He thinks the Schroders offering will satisfy a niche demand.

“For IFAs who offer a bespoke portfolio construction service for their clients, this fund will provide exposure to an area which offers the potential for good returns with a lower risk profile than a small cap fund alone. It has not been easy to access this type of fund before,” he says.

French thinks the literature is clear, concise and provides compelling reasons for investing in US small and mid caps. He points out that the fund will be managed by Jenny Jones, who has over 20 years investment experience managing small to mid cap US equities. In managing this fund she will be assisted by a team of four analysts.

Assessing Schroders past performance, French says Schroders has delivered outstanding results managing small and Smid caps as evidenced by the Schroder US smaller Companies, UK Mid 250 and UK smaller companies funds, all of which have received four stars from Morningstar and either AA or AAA ratings from Forsyth OBSR. He says: “Adviser remuneration for the new fund is as you would expect and the charges are also reasonable compared to investments of a similar nature.”

Turning to the less appealing features of the fund French says: “There is nothing that I do not like about the product itself. However, I do have some reservations about the timing of the launch. It appears that it has a relatively high proportion of holdings in consumer discretionary and staple stocks. Consumer confidence levels are declining and companies operating in these areas could be vulnerable to setbacks if spending declines. With consumer debt at record levels and a perceived bubble in the US housing market, this is a real concern.”

Consequently, French feels many mainstream IFAs will find this fund too specialised for them to consider. However, he adds: “Portfolio construction has not been given a high profile by many IFAs in the past. This is beginning to change with the launch of online tools and research facilities aiding the process. These are helping advisers without research departments to satisfy regulatory requirements. As expertise within the IFA sector develops, demand for more specialised funds in other geographical locations will inevitably increase.”

French thinks competition will come from any fund that invests in the mid cap space in the US. He also points out that smaller US companies funds will generally have some overlap in this area, as well as larger cap funds moving down the scale.


Market Suitability: Good
Investment strategy: Good
Charges: Average
Adviser remuneration: Average

Overall 8/10


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