Type: Oeic fund of funds
Aim: Growth of 4% above Libor by investing in a multi-asset portfolio of equities, bonds, private equity, property, hedge funds and emerging markets debt through investment funds
Minimum investment: Lump sum £1,000, monthly £50
Investment split: 11% absolute return, 10% high-yield debt,10% US equity, 9% emerging market debt, 9% commodities, 8% global equity, 8% property, 5% Pacific equity, 4% Emerging markets equity, 4% Japanese equity, 3% UK equity, 3% European equity, 2% private equity, 3% infrastructure, 11% cash
Isa link: Yes
Charges: Initial 5.25%, annual 1.5%
Commission: Initial 3%, renewal 0.3%
Tel: 0800 718 777
This fund of funds invests in a global multi-asset portfolio using both Schroder funds and externally managed funds.
Hargreaves Lansdown senior analyst Meera Patel thinks that with markets so volatile, there is an appetite for a fund like this as investors re-assess their risk profiles.
“The fund offers true diversification through a fund of funds approach. It has access to traditional assets like equities and bonds, but also invests in areas like private equity, hedge funds and emerging market debt. Some of these assets are not available to private investors so offers that extra layer of diversification,” she says.
Patel notes there is further flexibility in the approach with no bias in any one investment style such as value or growth. She likes the additional benefit of global diversification into different markets.
“The fund has a straight forward annual charge of 1.5 per cent. These days a lot of groups managing alternative assets tend to apply a performance fee, something we are not overly keen on,” says Patel.
The aim of the fund is to deliver positive returns, targeting 4 per cent above the Libor rate over a five-year rolling period, before charges. “Over this time frame I should hope this is achievable offering a real return greater than cash, albeit with a little more risk,” says Patel.
By mixing and matching alternative assets, the fund aims to deliver smooth long-term returns with up to half the volatility of direct investment in the stockmarket. “This could make up part of the core element of a portfolio around which satellite holdings are added,” says Patel.
Patel notes that a big chunk of Schroders’ own in-house pension fund is invested in this fund, which she says is effectively putting its own money where its mouth is, with conviction behind the strategy.
“We have yet to meet the manager but Schroders already manages an existing institutional fund which has performed very well since its launch. It compares favourably and ranks in the top decile of funds if it were compared with the IMA Balanced Managed sector – although I appreciate the fund will be put in the IMA Specialist sector,” she says.
Highlighting the potential drawbacks of the fund Patel says: “Schroders’ literature says this could be an alternative to a with-profit bond. In theory, it could be, but the fund is expected to have a yield of approximately 2 per cent. This is paid once a year so investors should not treat this as a complete likeness to with-profit bonds. The tax treatment would also be different.”
Patel also thinks investors should be aware that the fund is likely to underperform traditional long-only funds in a rising market, but having said that, she says it should perform better in a downturn.
“There is very little not to like about this product as it seems quite appropriate for the current environment. However, as with any new launch using new alternative investment tools, it pays to approach some of these with trepidation,” says Patel.
Discussing funds that could compete with Schroders, Patel finds it bizarre that this fund will be in the IMA Specialist sector where it is impossible to make reasonable comparisons. “I would have thought it would be in the Balanced Managed sector. I see the obvious competitors as the Midas balanced growth and Miton strategic portfolio, although I understand that they will not be exact like for like comparisons.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average