2013 was a good year for global stock markets and the Schroder Managed Balanced Fund was among the beneficiaries. The manager, Johanna Kyrklund, believes 2014 is likely to be a 'Goldilocks' year. This means the global economy is expected to be not too hot or cold, and moderate economic growth could be sustained with low inflation.
Johanna Kyrklund currently favours developed economies where she believes growth will be robust. This includes UK equities which make up 29.5% of the portfolio. As this is a 'fettered' fund of funds (meaning that it can only invest in other Schroder funds), the UK exposure is primarily achieved by investing in the Schroder UK Equity, Schroder Income and Schroder UK Alpha Plus funds. These have been positive for performance over the last year, particularly the income holding which has a bias towards the strongly performing financial and retail sectors.
There is also 14.5% exposure to the US, where Johanna Kyrklund expects attractive returns. The US was the first into the financial crisis and has been the first to recover, and she believes this recovery can be sustained. She expects inflation to remain low, helped by weak commodity prices, and believes the tapering of quantitative easing can be managed without hindering growth.
Johanna Kyrklund also favours Japan, where the depreciation of the yen is making Japan's exports cheaper to foreign buyers. This is improving the overall profitability of many Japanese firms. She expects the holding in Schroder Tokyo to benefit.
Elsewhere, the manager has been adding to Europe where she believes company earnings could improve. While economic growth is likely to be muted, she believes companies selling their goods and services overseas to countries such as the US could benefit from improved demand and therefore earnings. She believes the Schroder European Alpha Plus Fund is well positioned to benefit from these opportunities.
The manager has gradually been reducing the fund's exposure to bonds as these are no longer attractively valued in her view. Bonds currently account for 11% of the portfolio. While their yields may provide some support for income investors, she aims to take profits during periods of strength. Instead, she has increased exposure to absolute return funds such as the Schroder ISF Emerging Markets Debt Absolute Return Fund. She feels the fund can take advantage of weak emerging market currencies and offer some shelter during falling markets, particularly when volatility picks up as it has done so recently. However if the manager makes the wrong calls, the fund will fall in value.
Our view on this fund
Johanna Kyrklund's asset allocation decisions have proven positive and the underlying fund managers have also demonstrated good stock selection. These factors combined have led to the fund's long-term outperformance.
Performance over the last year has been solid, helped by its bias towards equities. Five year performance is also strong, growing by 78.5% compared to 58.9% for the IMA Mixed Investment 40-85% Equities sector*. Please note past performance is not a guide to future returns. We believe the fund could make a good core holding for long-term investors who wish to leave the asset allocation and fund selection decisions to a professional fund manager. It remains on the Wealth 150 list of our favourite funds across the major sectors.
|% Growth 02/01/2009 to 04/01/2010||% Growth 04/01/2010 to 04/01/2011||% Growth 04/01/2011 to 03/01/2012||% Growth 03/01/2012 to 02/01/2013||% Growth 02/01/2013 to 02/01/2014|
|Schroder Managed Balanced Fund||30.7||11.6||-5.4||13.4||14.2|
|IMA Mixed Investment 40-85% Shares||19.3||12.7||-5.5||9.8||13.8|
Past performance is not a guide to future returns. Source: Lipper IM.
*Figures for the H shares from 02/01/2009 to 02/01/2014.