Schroder Income Growth
Launched in 1995, Schroder Income Growth Fund’s principal aim is to provide real growth of income in excess of the rate of inflation. It invests mainly in the shares of UK larger and medium sized companies although it can also invest some of the portfolio in the shares of firms listed abroad.
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Fund Manager
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Sue Noffke, Lead Manager Sue Noffke, Head of UK Equities and UK Equity Fund Manager at Schroders, has been managing UK equity portfolios since 1993. She is a founding member of the Prime UK Equity team, established in 2006, and has been with Schroders since 1989, initially serving as an analyst covering the insurance, tobacco, and retail sectors. Sue holds a BSc in Business Administration and Biochemistry from Aston University, where she also received an Honorary Doctorate Degree. She has managed funds since July 31, 2006.
Sue Noffke, Lead Manager Sue Noffke, Head of UK Equities and UK Equity Fund Manager at Schroders, has been managing UK equity portfolios since 1993. She is a founding member of the Prime UK Equity team, established in 2006, and has been with Schroders since 1989, initially serving as an analyst covering the insurance, tobacco, and retail sectors. Sue holds a BSc in Business Administration and Biochemistry from Aston University, where she also received an Honorary Doctorate Degree. She has managed funds since July 31, 2006.
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Company Description
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Investment process
Schroder Income Growth invests primarily in above-average yielding UK equities but up to 20% of the portfolio may be invested in the shares of companies listed on recognised stock exchanges outside the UK.
The investment process starts with idea generation, with investment ideas coming from a variety of sources, such as industry research and quantitative analysis.
The research stage focuses on factors that influence a company's ability to create value for shareholders over the long term. The team meet with company management in advance of investing and meet most FTSE 350 companies each year to review the investment case of companies not held in the trust. Large and mid-sized companies form the majority of the portfolio.
In order to meet the trust’s income objectives and to provide diversified sources of income, the team looks at both yield today and growth in the future.
Regular contact with companies is an important element of monitoring holdings in the portfolio. In addition, the team’s focus on out-of-favour stocks for new ideas means there are inevitably ESG factors that individual companies need to improve over time.
Risk
As an income-based portfolio, risk tends to be lower than those vehicle’s targeting growth. The trust is well-diversified and has risk embedded throughout the process. With exposure to mid-caps, performance is somewhat linked to the domestic outlook for the UK economy.
ESG
ESG - Integrated
ESG factors are integrated throughout the investment process for the whole of the Schroders company, this trust included. ESG analysis helps determine the sustainability of a company’s earnings and potential risks.
Schroder’s ESG work begins with their ‘SustainEx’ tool developed in-house by a 25 strong central ESG team. Sustainex has won a number of awards and continues to be upgraded all the time. It quantifies the positive and negative impacts companies have on society. Most approaches measure impact relative to a benchmark where as 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 their own ESG specialist on the team. In addition to SustainEx, analysts also use the Context tool which allows analysts 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.
Gearing
Schroder Income Growth is allowed to gear up to 25% and also has a £35 million, 364 day revolving credit facility in place. Historically, the gearing has ranged between 5-20%.
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