Schroder British Opportunities
The Schroder British Opportunities trust (SBOT) seeks to tap into the unloved status of UK equities by targeting companies which have been in the eye of the storm. The portfolio consists of 30-50 small and medium-sized public and private businesses requiring fresh injections of equity, with the trust aiming to provide a net asset value total return of 10% per annum.
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Rory Bateman is the Head of the European equity team at Schroders, overseeing European Equity portfolios and managing the European research analysts and specialist fund managers. He is also the alternate portfolio manager for the Schroder European fund. Rory joined Schroders in April 2008, after 12 years at Goldman Sachs Asset Management, where he managed Continental European Equities and worked as an analyst across various European sectors. He began his investment career in 1995 and holds a degree in Financial Economics and a postgraduate qualification in Economics.
Tim Creed is the Head of UK and European Investments at Schroder Adveq, where he is also a member of the Management Committee and the Global Investment Committee. Additionally, he serves on the Advisory Boards of several prominent European buyout and turnaround fund managers. Before joining Schroder Adveq in 2004, Tim worked as a Project Manager at Aon and spent five years at Accenture in Strategy and Operations Consulting, focusing on financial services. He began his career as a Research Chemist at Astra Zeneca and was an Executive Public member of Network Rail from 2002 to 2007. Tim holds a First Class Bachelor's degree in Chemistry from the University of Edinburgh and an MBA from Oxford University, where he was the Clifford H. Barclay Scholar. In December 2019, he was recognized as one of the “50 Most Influential People in European Private Equity” by Financial News / Private Equity News.
Rory Bateman is the Head of the European equity team at Schroders, overseeing European Equity portfolios and managing the European research analysts and specialist fund managers. He is also the alternate portfolio manager for the Schroder European fund. Rory joined Schroders in April 2008, after 12 years at Goldman Sachs Asset Management, where he managed Continental European Equities and worked as an analyst across various European sectors. He began his investment career in 1995 and holds a degree in Financial Economics and a postgraduate qualification in Economics.
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Investment process
The trust targets two specific businesses, these are ‘high growth’ firms which are set to benefit from the rapid change in corporate and consumer behaviour due to Covid-19; and ‘mispriced-growth’ companies which, despite their current struggles, offer products and services with long-term structural growth drivers.
The managers plan to keep both the private and public segments of the portfolio as diversified as possible from a sector perspective. The trust also has a fixed seven-year life cycle.
The trust initially invested in listed companies worth between £50m and £2bn, before transitioning towards an equal mix of public and private equity investments across 30-50 firms. However, this has now shifted with private equity currently accounting for around two-thirds of the portfolio (figures at 18 August 2023). The private equity allocation will have a prominent focus on growth and buyout opportunities.
The trust has an ongoing charge of 0.6%, but there is also a performance fee of 15% on the private equity element of the portfolio – this is activated if it outperforms by 10% each financial year.
Risk
This trust is a pure play on the recovery of UK equities, with returns likely to be tied to market sentiment around the economy following the challenges posed by the likes of Brexit and Covid-19 in recent years. The trust also invests in small and medium-sized companies, both of which tend to be higher risk than larger companies. As with most trusts, this one borrows money to invest (i.e. uses gearing), which also increases risk levels for shareholders.
The trust also invests in private equity companies, which can be difficult to value. Information from underlying investee companies may be delayed, missing or restricted which would lead to valuations being made on incomplete information. It is difficult to accurately time the exit of private equity investments. Exits will take time and the portfolio managers may have very little influence on any decisions around the timing on exits. However, the team have a huge resource in the private equity field with over 45 investment professionals and over £9bn of assets managed in this space.
ESG
ESG - Integrated
Both the public and private equity teams have their own dedicated ESG specialists – they will then collaborate to maximise the overall ESG impact across both segments of the portfolio. ESG is present across all three stages of the trust’s investment process. The selection process has both exclusions that go against the firm’s ESG principles (tobacco, gambling and fossil fuels) as well as a positive screen favouring investments which follow the UN’s 17 Sustainable Development Goals (SDGs), which define the biggest challenges facing global societies.
The next stage is assessment criteria, where the team uses tools to provide greater clarity on sustainability features. Examples include SustainEx, which quantifies the positive and negative impacts on the environment and society, while the World-check service conducts contracting third party risk assessment. The final stage is engagement (interacting with portfolio companies to encourage and enforce positive change with regard to SDGs and ESG) as well as enhanced ESG reporting.
Investment Board
The four-strong board is chaired by Neil England. Neil has extensive international business experience in public and private equity companies. During his career he has held numerous leadership roles in manufacturing, sales, marketing and general management across sectors including food, distribution and technology. He was previously vice president of Mars Incorporated, group chief executive at The Albert Fisher Group and group commercial director at Gallagher Group.
Neil has also been chairman of a number of companies in the past three years, these include ITE Group, Blackrock Emerging Europe Plc and four private businesses. Diana Dyer Bartlett and Tim Jenkinson make up the rest of the board.
Gearing
The managers are able to gear up to 10% of net asset value, calculated at the time of drawdown.
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