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SchrodersStrength in European Equities
For professional investors and advisers only
ExcellenceIn pursuit of
Europe’s stock markets provide a wealth of opportunities for skilled investors, even in difficult times. Investing in Europe offers an opportunity to invest in a wealth of unique and global productive franchises, with many global leaders and household names listed in key financial centres from London, Paris and Frankfurt to Amsterdam, Zurich and Milan.
Schroders has a long history of expertise and skill in managing European equities. In this brochure we focus on four key funds:
Schroder ISF European Large Cap
Schroder ISF EURO Equity
Schroder ISF European Equity Alpha
Schroder ISF European Special Situations
Schroder International Selection Fund is referred to as Schroder ISF throughout this document.
Providing a wealth of opportunities
1
Schroders Strength in European Equities
Providing a wealth of opportunities
Our investment philosophy across the range of European Equity products is based on our belief that stockmarkets are inefficient – and this can be exploited by an active manager through fundamental research.
Markets mis-price stocks for three reasons:
– In the short term, markets are driven by sentiment, rather than a realistic assessment of company fundamentals or the broader picture, leading to volatility
– In the long term, markets are slow to adjust to major structural changes
– Markets persistently extrapolate recent trends. Notably, investors systematically overpay for above average growth and underpay for temporary disappointments.
This philosophy means that we believe active stock selection is key. The greatest price inefficiencies lie at the stock level – and an information advantage exists for the investor who researches the fundamentals. This allows us to identify mis-priced opportunities in companies with the ability to generate sustainable earnings growth and create value for shareholders.
Why Schroders forEuropean Equities?
1 A strong philosophy
2 Strength and depth of team
European Equities is one of the most important product offerings within our equity range. For this reason we have committed significant resources in terms of fund managers and analysts. In addition, we have developed a wide range of products with different performance objectives, risk criteria and style biases to meet our clients’ needs.
In-depth proprietary research and frequent company meetings are an essential part of our robust investment process. One of our key competitive advantages is our strong franchise with European corporates which ensures top level access to company management (CEOs and CFOs) on a regular basis. This access allows us to gain an insight into a number of factors including the operating performance of the company in question, integrity and ability of the management team and the competitive environment of the sector.
3 Corporate access
Head of European EquityRory Bateman
Team Fund ManagersRory Bateman
Martin Skanberg
Specialist Fund ManagersLeon Howard-Spink Paul GriffinNicholette MacDonald-BrownJamie LowrySonja LaudIan Kelly
8 European Equity Sector Analysts
James Dawson – European Equity Product Manager
Source: Schroders as at December 2012.
2
Schroders Strength in European Equities
Stage I Stage IIIStage II
– Idea generation: ‘Thesis’ – Focus and consistency
– Integral team driven process – Cross-sector expertise – Improve decisions
– Analysts/PM ownership – daily attribution reports
– Conviction/ideas – Intentional risk: PRISM
Proprietary Fundamental
Research
Team Debate
Thematic Portfolio Construction and Risk Management
Key features:
– A fund with a proven track record of success in different market conditions
– The team are highly incentivised: Our investment professionals are paid directly according to the attribution they generate in the live flagship portfolio
– Whilst Rory is the ultimate decision maker, each analyst on the team is encouraged to get involved in helping shape the portfolio
– Maximise alpha opportunities: We aim to fully utilise our sector experts and portfolio management experience in generating excess returns through both active stock and sector positions
– Dynamic investors: Our flexible style approach enables us to take advantage of market anomalies and different market environments
– Rigorous risk controls to ensure performance is achieved within a controlled environment.
Source: Schroders as at December 2012.
Schroder ISF European Large Cap
Managed by Rory Bateman, Schroder ISF European Large Cap aims to find the best opportunities in large cap stocks across Europe including the UK, and seeks to provide capital growth. Our robust team based approach to the management of the portfolio has no style bias and ensures constant idea generation within a risk controlled framework.
3
Schroders Strength in European Equities
S&P Fund Management Ratings are sourced from S&P. Morningstar Ratings are sourced from Morningstar. Ratings as at 31 December 2012.
Performance
Fund facts A Acc Share Class
ISIN Code LU0106236937
Bloomberg Code SCHEUMALX
Fund Inception 04 December 1995
Fund Currency EURO
Benchmark MSCI Europe – Net Return
Initial Charge Up to 5.00% of the total subscription amount
Annual Management Fee 1.25%
1 year 2 years 3 years 5 yearsSince
30/06/082Since
launch3
Schroder ISF European Large Cap A Acc (%)
20.63 15.05 29.95 -9.28 16.66 177.06
Sector Average1 18.72 9.32 22.41 16.72 2.83 177.56
MSCI Europe Net Return 18.07 11.80 25.44 -13.62 8.54 213.62
Quartile4 2 1 1 1 1 2
Source for performance data: Morningstar, as at 30 November 2012. Data in Euros.1 Sector is Morningstar GIFS Europe Large-Cap
Blend Equity. 2 30 June 2008 is the date Rory Bateman started
managing the fund.3 Fund launch data taken from 5 December 1995.4 Quartile ranking, as based on Morningstar fund
rankings within assigned peer group.
Rory BatemanFund Manager and Head of Schroders’ European Equity team
– Manages Pan-European Equity portfolios, including Schroder ISF European Large Cap and Schroder ISF European Equity Focus
– Before joining Schroders in 2008, Rory worked for Goldman Sachs Asset Management where he was a portfolio manager for Continental European Equities for 8 years
– Based in London, Rory has over 16 years’ investment experience including roles as an analyst covering a diverse range of sectors across the European market.
Source: Schroders as at December 2012.
Ratings
Through a combination of first class stock selection and outstanding portfolio management we aim to deliver
consistent first quartile performance.
Rory Bateman, Fund Manager and Head of Schroders’ European Equity team
4
Schroders Strength in European Equities
Key features:
– A fund with a long term track record of outperformance*
– Whilst Martin is the ultimate decision maker, each analyst on the team is encouraged to get involved in helping shape the portfolio
– Maximise alpha opportunities: We aim to fully utilise our sector experts and portfolio management experience in generating excess returns through both active stock and sector positions
– Dynamic investors: Our flexible style approach enables us to take advantage of market anomalies and different market environments
– Rigorous risk controls to ensure performance is achieved within a controlled environment.
Source: Schroders as at December 2012.*Please refer to the performance chart on the following page.
Schroder ISFEURO Equity
Managed by Martin Skanberg, Schroder ISF EURO Equity aims to find the best opportunities across countries participating in EMU, and seeks to provide capital growth. Martin works very closely with Rory Bateman and the Fund is managed using the same fundamental process as Schroder ISF European Large Cap.
– The Investment thesis identifies opportunities where the market is underestimating a company’s: Growth, Margins, Returns
– The inflection point helps to determine ‘Why act now?’
– Attractive valuation is not a sufficient reason to buy a stock but is crucial in determining the size of the position.
Implied market valuation
Inflection point thesis
Conviction
+
5
Schroders Strength in European Equities
S&P Fund Management Ratings are sourced from S&P. Morningstar Ratings are sourced from Morningstar. Ratings as at 31 December 2012.
Performance
Fund facts
Source for performance data: Morningstar, as at 30 November 2012. Data in Euros.5 Sector is Morningstar GIFS Eurozone
Large-Cap Equity.6 13 May 2010 is the date Martin Skanberg
started managing the fund.7 Quartile ranking, as based on Morningstar fund
rankings within assigned peer group.
Martin SkanbergFund Manager
– Martin Skanberg has over 18 years’ experience in fund management
– He joined Schroders in 2004, before taking on portfolio management responsibilities in 2006
– His investment career commenced in 1994 when he joined SEB Asset Management as an investment analyst for Nordic Industrials and Basic Materials, later becoming Head of European Research
– Martin holds a Masters in Financial Economics.
Source: Schroders as at December 2012.
Ratings
Europe provides a wealth of opportunities to invest in quality global franchises trading on very attractive multiples relative
to history, other regions and other asset classes.
Martin Skanberg, Fund Manager
A Acc Share Class
ISIN Code LU0106235293
Bloomberg Code SCHEEAA:LX
Fund Inception 21 September 1998
Fund Currency EURO
Benchmark MSCI European Monetary Union Net TR
Initial Charge Up to 5.00% of the total subscription amount
Annual Management Fee 1.5%
1 year 2 years 3 years 5 years 10 years Since13/05/106
Schroder ISF EURO Equity A Acc (%)
23.61 13.19 14.15 -21.09 61.10 13.67
Sector Average5 17.29 5.21 8.90 -23.84 36.76 5.78
MSCI EMU Net TR 16.21 4.45 7.34 -29.01 42.39 4.31
Quartile7 1 1 2 2 1 1
6
Schroders Strength in European Equities
Schroder ISFEuropean Equity Alpha
Managed by Jamie Lowry, Schroder ISF European Equity Alpha aims to find the best opportunities across Europe including the UK, and seeks to provide capital growth. The product is unconstrained and managed with a strong value bias.
The fund employs a multi faceted approach to idea generation, including quantitative screening, internal analysts’ ideas and third party research to build a concentrated ‘best ideas’ portfolio.
Key features:
– A bottom up unconstrained Fund with a value bias
– Best ideas, backed with conviction
– A strong contrarian philosophy which focuses on long term outperformance rather than short term volatility
– Position sizing is a function of the margin of safety in the investment and the fund manager’s conviction
– The portfolio invests across the market capitalisation spectrum – including large, mid and small cap companies.
Idea Generation Fundamental research
Portfolio construction
Continuous monitoring of valuation and fundamentals
Quantitative Screening
Buy-side Investors
Periodicals
Determine Intrinsic Value
Assess Management
Margin of Safety
Minimise Macro Risks
Understand Correlations
Selling is as important as buying
Strict valuation discipline
Combing multi-source idea generation with proprietary fundamental research
> > ><
7
Schroders Strength in European Equities
A rigorous and consistent process of identifying and acquiring undervalued businesses is the surest way of delivering long-
term results – and we endeavour to do just that.
Jamie Lowry, Fund Manager
A Acc Share Class
ISIN Code LU0161305163
Bloomberg Code SISEEAA:LX
Fund Inception 31 January 2003
Fund Currency EURO
Benchmark MSCI Europe Net Return
Initial Charge Up to 5.00% of the total subscription amount
Performance Fee 15% of the Fund’s outperformance of
MSCI Europe Index, subject to high water mark
Annual Management Fee 1.5%
1 year 2 years 3 years 5 yearsSince
launch9
Schroder ISF European Equity Alpha A Acc (%)
23.12 6.50 15.45 -16.06 98.35
Sector Average8 17.10 6.07 14.25 -21.09 53.96
MSCI Europe Net Return 18.07 11.80 25.44 -13.62 88.31
Quartile10 1 3 2 2 1
S&P Fund Management Ratings are sourced from S&P. Morningstar Ratings are sourced from Morningstar. Ratings as at 31 December 2012.
Performance
Fund facts
Source for performance data: Morningstar, as at 30 November 2012. Data in Euros.8 Sector is Morningstar GIFS Europe Large-Cap
Value Equity.9 The fund was launched on 31 January 2003.10 Quartile ranking, as based on Morningstar fund
rankings within assigned peer group.
Jamie LowryFund Manager
– Fund Manager Jamie took over the management of the fund in 2010, having been the co-manager for the previous three years.
– He has been with Schroders for over 8 years, originally joining as an equity analyst on the European Equity Team.
– He has a Degree in Financial & Business Economics, Royal Holloway College, University of London, and is a CFA Charterholder.
Source: Schroders as at December 2012.
Ratings
8
Schroders Strength in European Equities
Schroder ISF European Special Situations
The Fund uses a flexible bottom-up approach supported by extensive in-house research and analytical resources. We do not believe that an aggressive top-down approach can be successful year-in year-out as correctly predicting macro factors such as oil prices and global interest rates is not a repeatable skill. What is repeatable is the selection of quality stocks through a process of continually meeting the management and looking for growth prospects that are not reflected in share prices. An avoidance of ‘market noise’ and a focus on specific drivers of specific companies should add value and help to avoid the temptation to speculate too heavily on the overall direction of the market.
Managed by Leon Howard-Spink, Schroder ISF European Special Situations aims to find the best opportunities across Europe including the UK, and seeks to provide capital growth. The product is unconstrained and managed with a quality and growth bias.
Key features:
– A bottom up unconstrained Fund with a quality and growth bias
– The Fund aims to achieve high alpha with low volatility through diversification of themes
– The Fund has delivered consistent relative outperformance through different environments since launch.
Source: Schroders as at December 2012.
Stock picking Portfolio construction
Quality of business modelFinancials (cash flow)
Sustainability of returnsGrowth driversManagement
Valuation
Diversify the funds byEconomic sensitivity
Style: value and growthGrowth drivers
Earnings visibilityMarket capitalisation
High alpha and Low volatility
Two key skills...
To deliver...
>>
>>
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Schroders Strength in European Equities
We are committed to delivering strong relative performance over the long term for clients, through a well
diversified portfolio and a focus on business risk rather than index risk.
Leon Howard-Spink, Fund Manager
A Acc Share Class
ISIN Code LU0246035637
Bloomberg Code SCHESSALX
Fund Inception 31 March 2006
Fund Currency EURO
Benchmark MSCI Europe – Net Return
Initial Charge Up to 5.00% of the total subscription amount
Performance Fee 15% of the Fund’s outperformance of
MSCI Europe, subject to high water mark
Annual Management Fee 1.5%
1 year 2 years 3 years 5 yearsSince
launch12
Schroder ISF European Special Situations A Acc (%) 23.93 18.08 40.14 2.16 14.86
Sector Average11 18.74 9.38 22.51 -16.66 -7.60
MSCI Europe Net Return 18.07 11.80 25.44 -13.62 -0.36
Quartile13 1 1 1 1 1
S&P Fund Management Ratings are sourced from S&P. Morningstar Ratings are sourced from Morningstar. Ratings as at 31 December 2012.
Performance
Fund facts
Source for performance data: Morningstar, as at 30 November 2012. Data in Euros.11 Sector is Morningstar GIFS Europe Large-Cap
Blend Equity.12 The fund was launched on 31 March 2006.13 Quartile ranking, as based on Morningstar fund
rankings within assigned peer group.
Leon Howard-SpinkFund Manager
– Leon has over 13 years’ experience as a European Fund Manager and has managed Schroder ISF European Special Situations since launch in 2006
– Prior to Schroders, Leon joined Jupiter Asset Management in 1997, managed the Pan European fund ‘Centrale Croissance Europe’ from January 1999 to July 2005 and ‘Jupiter European Special Situations Fund’ from January 2001 to July 2005.
Source: Schroders as at December 2012.
Ratings
Risk warnings: Investments in equities are subject to market risk and, potentially, to currency exchange rate risk. This fund may use financial derivative instruments as a part of the investment process. This may increase the fund’s price volatility by amplifying market events. Important information: This document does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder International Selection Fund (the ‘Company’). Nothing in this document should be construed as advice and is therefore not a recommendation to buy or sell shares. Subscriptions for shares of the Company can only be made on the basis of its latest prospectus together with the latest audited annual report (and subsequent unaudited semi-annual report, if published), copies of which can be obtained, free of charge, from Schroder Investment Management (Luxembourg) S.A. An investment in the Company entails risks, which are fully described in the prospectus. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get the amount originally invested.
Third party data is owned or licensed by the data provider and may not be reproduced or extracted and used for any other purpose without the data provider’s consent. Third party data is provided without any warranties of any kind. The data provider and issuer of the document shall have no liability in connection with the third party data. The Prospectus and/or www.schroders.com contains additional disclaimers which apply to the third party data.. This document is issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA who is authorised and regulated by the Financial Services Authority. For your security all telephone calls are recorded. w42709
Schroders is an independent, dedicated asset manager with a strong heritage and culture based on over 200 years’ experience of investment markets. Listed in the UK, we benefit from a strong balance sheet and a stable ownership structure which allows us to focus entirely on delivering results for our clients.
With over €254.5 billion funds under management and an international network spanning 34 offices in 27 countries, Schroders has the perspective and expertise to identify major investment potential wherever it is located.
To find out more about our business and our range of funds and services, go to
www.schroders.com
Source: Schroders as at 30 September 2012.
Trusted heritage
Advanced thinking