Schroder Global Alpha Plus - Fund update

Globalisation has changed many aspects of our lives, including the way we consider investments. Constructing a portfolio with strict reference to geographical regions is becoming less relevant, as companies (larger ones in particular) tend to operate internationally. A global perspective is becoming essential to fully understand companies and to discover where the foremost opportunities lie.

This is the strategy adopted by Virginie Maisonneuve, manager of the Schroder Global Alpha Plus Fund, which aims to invest in a focused portfolio of some of the best companies from across the globe. In her view, the key to successful investing, like riding a bicycle, is keeping your eyes on the horizon rather than worrying about the bumps in the road immediately in front of you. So a prominent feature of the fund is the attention paid to the important long-term trends likely to shape the investment world.

One such theme is climate change. Whatever your personal views, it is indisputable that increasing political consensus will have far reaching consequences. Virginie Maisonneuve believes global emissions will need to be reduced to 25% of current levels by 2050, requiring $20 trillion worth of investment in energy infrastructure by 2030. This will have considerable consequences for some companies, but could create significant opportunities for others such as Suncor Energy, a significant holding in the portfolio and a company investing in renewable energy sources such as wind and biofuels, as well as developing oil sands in Canada.

Tied in closely with this theme is the supply of essential resources, which are in increasing demand, particularly from emerging markets whose populations are rising. Globally, an estimated $32 trillion worth of investment is required by 2030 for energy, water, transport, and communications infrastructure. However, there is not just population growth to consider. It is estimated the number of people aged over 80 will quadruple, which will have an impact on many areas such as healthcare spending.

By considering the longer-term impact of each of these factors Virginie Maisonneuve and co-manager Jonathan Armitage look to construct a portfolio well positioned to adapt from the changing economic landscape. The largest holding in the portfolio is gas explorer and provider, BG Group, a company that stands to benefit from more than one of these themes. Increasing demand for energy means that gas should become a more valuable commodity. It also has low carbon intensity compared with other fossil fuels, so is considered a cleaner source of energy. Ultimately, these factors should translate into growing demand and increased profits.

It would be wrong to think of this fund as simply a thematic investment though. The managers look for quality companies, but will only invest at an attractive price. In this regard the managers’ 40 years’ combined experience should stand them in good stead, as should the in-depth research of Schroders’ worldwide teams of analysts.

In addition, the fund can invest in smaller companies, use derivatives to enhance returns, and some of the holidings may be based in emerging countries, so you have many factors that could be working for you but this is a higher risk fund so will appeal to adventurous investors.

Since the fund’s launch in April, most markets have fallen, so it is not a surprise to see the fund’s unit price below its launch price. Additionally the Pound has recently strengthened meaning many overseas investments have lost value in Sterling terms. The fund also has a concentrated portfolio of ’best ideas’, which increases risk as every holding has a big impact. We still believe in the calibre of the management team and feel the fund has great potential, so it remains on the Wealth 150 list of our favourite funds in each sector.