Schroders fund manager James Sym is the named portfolio manager for the Schroder European Alpha Income Fund. The fund has achieved fantastic capital growth, and outperformance of both its sector average, IA Europe ex UK, and its benchmark, the FTSE World Europe ex UK. The fund is also impressively placed in the top decile of its sector since its launch in 2012. Here James explains the fund’s investment approach.
Firstly, the fund’s objective is to provide income along with long-term capital growth through investment in equity and equity related securities of European companies. We do not require individual holdings to satisfy particular income and yield criteria but in aggregate we target a portfolio yield of 110% of the FTSE World Europe ex UK index yield on a rolling three year basis.
To achieve this, we adopt a pragmatic, contrarian approach that aims to achieve consistent outperformance largely derived from stock selection. In essence, we aim to look beyond the macro environment and identify the hidden value that exists within select European companies.
Our contacts with senior management and local brokers are very important to this process. James Rutland (back-up fund manager) and I undertake an intensive programme of company meetings, conference calls and on-site visits each year. The majority of the team’s direct contact with companies is one-to-one with senior management at their headquarters. On-site visits in particular can provide invaluable insights into the future direction of the business and management’s priorities. We deliberately engage with companies without a specific agenda to allow open and far ranging discussion. However, within the course of meetings we expect to understand more about the current operating conditions, outlook and strategy of each business. Time is also spent focusing on the dividend policy; attempting to gain an insight into the culture of the management towards dividends and the ability of the company to support a progressive dividend.
We also work closely with a trusted network of external local brokers distributed across eight regions within Europe. Local brokers offer timely and detailed information on companies and industries in their regions which supplements the knowledge we gain from company meetings.
In addition to stock selection, we allow business cycle factors to shape portfolio construction at major turning points of the economic cycle. We do not believe that companies operate in a vacuum independent of market cycles. Instead we believe that certain stocks are more likely to outperform as the economy moves through each stage of the cycle; expansion, slowdown, recession and recovery. Importantly, this is where we can add value in comparison to equity funds that adopt a purely bottom-up stock picking approach. The key advantage of our approach is that it’s dynamic and we avoid a permanent bias towards a particular style of investing like growth or value and therefore we aim to achieve alpha and income across all market environments.
James Rainbow, Head of UK Financial Institutions and Strategic Accounts at Schroders, comments: “James Sym is becoming an increasingly well-known fund manager and we are delighted that Old Mutual Wealth have selected him for inclusion as part of WealthSelect. As an original launch partner, we are equally pleased to see another Schroder strategy available to clients using WealthSelect.”
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