Schroder Managed Balanced Fund research update

Recent announcements of further stimulus measures by Western central banks were received positively by financial markets. However, Johanna Kyrklund, manager of the Schroder Managed Balanced Fund, does not expect stock markets to rise significantly further until data show that a sustained economic recovery is underway.

Nevertheless, she has been happy to increase exposure to Europe, believing the chance of the single currency zone breaking up and going into economic meltdown has been reduced. She continues to favour developed economies such as the UK and US over higher risk emerging markets, which she believes will be hit by reduced demand for exports as economic growth in the West remains subdued.

Considering the lacklustre outlook for economic growth, a preference for large, high-quality companies with the potential to pay attractive dividends is maintained. This is a fettered fund of funds, meaning it invests in other funds managed by Schroders. Exposure to Europe is achieved through an investment in the Schroder European Alpha Plus Fund, managed by Leon Howard-Spink. He is currently focusing on high-quality businesses in core European nations such as France, Switzerland and Germany. He has no exposure to Spain or Portugal and only holds one Italian stock.

UK exposure has been added to the portfolio through investments in the Schroder UK Equity Fund, Schroder Income Fund and Richard Buxton's Schroder UK Alpha Plus Fund. All have key positions in large, cash-generative companies such as GlaxoSmithKline and Vodafone.

Elsewhere in the portfolio there is exposure to Japan through the Schroder Tokyo Fund, managed by Andrew Rose; and exposure to Asia through Mathew Dobbs's Schroder Asian Alpha Plus Fund. While economies in the region face their own challenges, some companies will continue to be successful. These managers focus on the prospects of individual companies, rather than the prospects for the wider economy and Johanna Kyrklund believes they have the skill to select good-quality businesses able to survive further economic challenges.

In the fixed-interest universe Johanna Kyrklund retains a preference for investment grade corporate bonds as she believes the yields on government bonds are too low. She also has limited exposure to higher risk high yield bonds because she believes the yields on offer are not high enough to compensate investors for the additional risk being taken.

This fund provides broad exposure to equity and bond markets globally. Schroders have well-resourced teams in place managing this fund and the underlying holdings, some of which appear on the Wealth 150 list of our favourite funds in each sector in their own right. For long-term investors who wish to leave decisions of asset allocation and fund selection to a professional fund manager, we believe this fund could be a good choice for a core holding. It remains on the Wealth 150.