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Schroder Small Cap Discovery - a global complement

We look at a fund that offers something different from the global giants.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Innovation can revolutionise the way we live.

More than just a trend or passing phase, innovation is something most companies strive for. In many cases it determines how successful a company will be.

All companies have to start somewhere though. They won’t grow into the world’s market leaders overnight.

But it’s often smaller companies that are the most innovative. They tend to be more dynamic, which means they have the potential to grow strongly over the years.

Smaller firms can find growth potential in niche areas unexplored by larger businesses. More-established companies can find it difficult to jump on new opportunities or develop new ideas quickly.

In the past, most UK investors have focused on their home market to gain exposure to younger companies. But there’s an expanding set of opportunities from across the globe waiting to be uncovered.

Asian and emerging markets have become hotbeds of innovation over the years. As developing economies mature, improved infrastructure, regulation, education and financial services help to open up a wider range of opportunities to investors. Increasing wealth also causes a rise in consumer demand and the number of small, entrepreneurial companies increases in response.

This adds an extra dimension to the world’s faster-growing markets and in some cases these companies are even overtaking Western counterparts. However, smaller companies are higher risk compared to larger businesses and this is particularly true in higher-risk emerging markets.

The global opportunity - why go global?

How could investors take advantage?

Fund manager Matthew Dobbs aims to take advantage of the increasing number of smaller companies exposed to higher-growth regions of the world.

His Schroder Small Cap Discovery Fund mainly invests in companies based in Asian and emerging countries. It also invests in businesses based in developed markets that earn a large portion of their profits in emerging economies. Developed Asian markets such as Hong Kong are also included.

The fund is currently biased towards consumer companies. A rising middle class means household spending in Asian and emerging countries is growing, and means these companies could benefit from increasing consumption. This could boost the growth of companies that are one step ahead of the competition and provide innovative goods and services.

Schroder Small Cap Discovery - performance since launch

Past performance is not a guide to the future. Source: Lipper IM to 31/01/2018

Annual percentage growth
Jan 13 -
Jan 14
Jan 14 -
Jan 15
Jan 15 -
Jan 16
Jan 16 -
Jan 17
Jan 17 -
Jan 18
Schroder Small Cap Discovery 0.1% 27.6% -8.6% 26.1% 13.7%
FTSE Emerging -15.0% 20.0% -16.7% 43.3% 22.0%

Past performance is not a guide to the future. Source: Lipper IM to 31/01/2018

Key Investor Information

Find out more about this fund, including how to invest

Our View

In our view this fund offers something unique. Most funds investing in higher-risk Asian and emerging markets focus on larger firms. But the Schroder Small Cap Discovery Fund focuses on areas that many investors overlook. We think it could sit well next to a global fund focused on larger companies, which are mainly located in developed markets.

Matthew Dobbs is one of the most experienced investors in Asian and smaller companies. He has a long and successful track record investing in this region.

We view the combined exposure to some of the world’s most innovative smaller companies with the long-term growth potential of Asian and emerging markets as an exciting prospect. A long-term investment horizon is essential, however, given the higher levels of volatility seen in this area of the market.

Key Investor Information

Find out more about this fund, including how to invest

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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