Schroder Income
Schroder Income is a value-driven fund, investing in companies valued at less than their true worth and waiting for a correction. It is a UK equity income fund, with an emphasis on absolute return, that seeks to balance dividend yield with dividend growth and balance sheet safety to achieve a growing income. This approach is not without risk and performance can be volatile.
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Fund Manager
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Fund Manager
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Andrew Evans, CFA, joined Schroders in June 2015 as part of the Global Value Team. Before Schroders, he worked at Threadneedle, overseeing the UK research process, and began his investment career in 2001 at Dresdner Kleinwort as a Pan-European transport analyst. He is a Chartered Financial Analyst and holds a degree in Economics from Exeter University.
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Company Description
Founded in London in 1804, today Schroders operates in more than 25 countries, employing more than 5,000 people, close to the markets in which they invest. Schroders is listed on the London Stock Exchange and invests in a range of asset classes including equity, fixed income, multi-asset and alternatives. The group was awarded the Elite Equities Provider Rating in 2015, 2016 and 2017.
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Quote from the Fund Manager
Inflation is the silent thief. Investing in companies that can grow sustainable dividends is the only way to beat it.
Andrew Evans
Investment process
Much like the Elite Rated Schroder Recovery fund, the starting point for Schroder Income is a very basic valuation screen to highlight potential investment candidates. However, in this fund, the income that companies generate through paying a growing dividend is equally important. Therefore, the managers look to identify stocks that have not only become significantly undervalued, but also have dividend potential.
Risk
The value approach of Schroder Income fund means it may be more volatile than its peers because there is the possibility of company failures and disappointments if an expected catalyst for change does not arrive. Risk is also increased as the managers look outside the traditional 'safe' large-cap UK equities.
ESG
ESG - Integrated
ESG factors are integrated throughout the investment process for the whole of the Schroders fund range. The process begins with the ‘SustainEx’ tool which has been developed in-house by a 25-strong central ESG team.
SustainEx quantifies the positive and negative impacts companies have on society. It has won a number of awards and continues to be upgraded all the time. Most approaches measure impact relative to a benchmark, whereas SustainEx calculates a quantifiable overall impact. There are over 45 positive and negative externalities which have been drawn from over 400 academic studies and are applied to 9,000 global companies.
The tool helps fund managers to identify previously unaccounted for ESG risks and helps them to build these risks into their valuation framework. Each individual strategy has its own ESG specialist on the team. In addition to SustainEx, analysts also use the Context tool which allows them to add their own input. It is also used in the valuation process, with higher discount rates applied to weak ESG companies. Some companies’ ESG will be so weak that they are considered uninvestable. ESG also helps shape portfolio construction: those stocks with a higher ESG risk may have a reduced weight in the portfolio, or if the risk is high enough, no position at all.
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