Schroder has announced the ‘soft closure’ of the Schroder US Smaller Companies Fund run by Jenny Jones. This means the fund will remain open for investment but that all discounts cease to apply. Therefore investors will pay the full 5.25% initial charge when purchasing the fund from 1st February 2010.
Schroder has taken this decision in order to limit the size of the fund. When dealing in smaller companies a large fund size can become restrictive because it is sometimes difficult to buy and sell shares in sufficient quantities. Limiting the fund size will help ensure the manager can continue to move freely between stocks and that timely decisions can be made.
We believe this is a sensible move and should help the performance potential for existing investors. We think it should therefore be seen as a positive development for holders of the fund. However, we have removed it from our Wealth 150 list because the initial charge will now be prohibitive for new investors.
Investors looking for a similar fund (or a replacement fund for regular savings) could consider the Schroder US Mid Cap Fund, which is run by the same management team. Although the Mid Cap fund invests a larger proportion of its assets in medium-sized companies, there are similarities between this and the Smaller Companies Fund. There is typically a 25 -30% overlap in terms of holdings between the two funds, and 20% of the Mid Cap Fund is in smaller company stocks currently. The performance of the funds has also been quite similar, although please remember that past performance is not a guide to future returns:
| % growth 03.01.05 to 02.01.06 | % growth 02.01.06 to 01.01.07 | % growth 01.01.07 to 01.01.08 | % growth 01.01.08 to 01.01.09 | % growth 01.01.09 to 01.01.10 | |
|---|---|---|---|---|---|
| Schroder US Smaller Companies | 18.56 | 6.94 | 8.64 | -12.24 | 24.06 |
| Schroder US Mid Cap | N/A |
2.79 | 9.99 |
-9.86 | 23.41 |
| IMA North America | 18.50 | -1.35 | 4.54 | -18.52 | 19.08 |
| IMA North American Smaller Companies | 20.53 | -2.44 |
6.32 | -16.90 | 24.18 |
Source: Lipper Hindsight. Full year performance figures for the Schroder US Mid Cap fund are unavailable for 2005-2006.
The quality and experience of Jenny Jones and her team remains worthy of consideration for exposure to the US market, and we believe the Schroder US Mid Cap fund is a valuable addition to the Wealth 150 list of our favourite funds in each sector.
