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Schroder Global Equity Income Fund research update

Heather Ferguson | Wed 04 November 2015

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

Ian Kelly and Jamie Lowry have been at the helm of the Schroder Global Equity Income Fund since November 2013.

The managers' primary focus is on finding large companies undervalued by other investors as they feel strong long-term performance depends on ensuring they do not pay too much for the investment in the first place. They therefore seek companies that are fundamentally strong, but temporarily out-of-favour; for example, due to unfavourable economic conditions or poor decisions by previous management. They then wait patiently for the company to return to health and for sentiment to improve.

The healthcare and food & beverages sectors are areas in which income-seeking investors have historically felt most comfortable, in the managers' view. This is because their earnings generally don’t change considerably year to year. However, they feel these sectors are currently overvalued. Low interest rates have driven a growing demand for these stocks, chasing prices to unsustainable levels, in the managers' view. They have therefore been taking profits from these areas to reduce exposure. Conversely, they feel sectors usually perceived as higher-risk, where earnings are traditionally less stable, are providing good opportunities.

Although US equities are generally regarded as highly-valued the managers have found an increasing number of opportunities in the region. Recent investments in the US include electric component manufacturer Vishay Intertechnology which the managers feel is undervalued by other investors despite its strong balance sheet and prudent management team; US computing giant IBM where they expect falling revenues to stabilise; and Symantec, owner of Norton anti-virus software, where the managers are optimistic about the company's restructuring and product repositioning.

While a value-based investment approach can work well over the long-term, this investment style has recently been out-of-favour, leading to periods of volatility in the fund's performance. The fund has outperformed the peer group since Ian Kelly and Jamie Lowry assumed management, returning 13.8% compared with 6.2% for the IA Global Equity Income sector. However, this is a relatively short time period and we currently feel there are better managers investing in this area. The fund therefore does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.

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Our view on this fund

While a value-based investment approach can work well over the long-term, this investment style has recently been out-of-favour, leading to periods of volatility in the fund's performance. The fund has outperformed the peer group since Ian Kelly and Jamie Lowry assumed management, returning 13.8% compared with 6.2% for the IA Global Equity Income sector. However, this is a relatively short time period and we currently feel there are better managers investing in this area. The fund therefore does not currently feature on the Wealth 150 list of favourite funds across the major sectors.

Please note the fund's charges can be taken from capital which can increase the yield but reduces the potential for capital growth.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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