Marketing material for professional investors or advisers only. This material is not suitable for retail clients
Schroders Investment Conference 2018, Manchester
22 May 2018
Jenny Jones, Head of US Small & Mid Cap Equities
US Small & Mid Cap Equities
#SICM18
@Schroders_UK
A quick recap…
Why Schroders US Small Cap?
2
Schroder US Small Cap: attractive risk/return profile since 2003
Access to a risky asset class at a lower level of risk
Source: Schroders, Morningstar, January 2003 to December 2017. Composite (gross of fees), USD. Performance shown is past performance. Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed. Other periods may have achieved different results. Please refer to the back of this presentation for Important Information.
Key points– Focus on downside protection – Portfolio construction uses three distinct types
of stocks– Mispriced growth offer capital growth
opportunities– Steady Eddies provide capital preservation– Turnarounds offer idiosyncratic growth potential
– Stock selection a strength of the team
Standard deviation
Annualized return (%)
Return(%)
Standard Dev (%)
Schroder US Small Cap 13.5 15.2
Russell 2000 Index 11.2 18.2
S&P 500 Index 9.9 13.3
Schroder US Small
Cap
Russell 2000
S&P 500
6
8
10
12
14
16
10 12 14 16 18 20
Distinguishing characteristics
3
Diversified sources of alpha
The opinions stated in this document are those of the US Small and SMID Cap Equity team and are subject to change.
Mispriced growth (50–70% of portfolio)Objective: Capital Growth– Companies experiencing a period of growth due to industry or company factors– Price understates: sales growth OR incremental margin growth OR rising cash flow return
on investment– Tend to lead our portfolio in rising markets as investors seek growth opportunities
Steady Eddies (20–50% of portfolio)Objective: Capital Preservation– Companies with stable/recurring growth characteristics – Strong free cash flow, good balance sheet but these are not traditional value stocks– Generally provides the ‘ballast’ for difficult markets as investors seek consistency
Turnarounds (0–20% of portfolio)Objective: Idiosyncratic Growth– Companies whose growth engine has broken– Catalysts in place with evidence that growth is returning– Riskiest category, performance is driven by specific risk
Schroder US Smaller Companies
Snapshot on positioning
Diversified alpha sources
5
US Small Cap Strategy historical allocations (weighted)
Source: Schroders, FactSet as of 30 April, 2018.
62%
35%
3%0
10
20
30
40
50
60
70
80
Dec
-08
Jun-
09
Dec
-09
Jun-
10
Dec
-10
Jun-
11
Dec
-11
Jun-
12
Dec
-12
Jun-
13
Dec
-13
Jun-
14
Dec
-14
Jun-
15
Dec
-15
Jun-
16
Dec
-16
Jun-
17
Dec
-17
Mispriced growth Steady Eddies Turnarounds
Schroder US Smaller Companies Fund
6
Portfolio vs. index
Sector weights – April 30, 2018
Source: FactSet, Style Research as of 30 April, 2018 in GBP. Sector weights for the account and the Benchmark index are for illustrative purposes only and subject to change and should not be viewed as an investment recommendation. *Active share is a measure of the percentage of stock holdings in a portfolio that differ from the benchmark index.
%Active share* = 92.2%
16.4
6.2
15.8
2.0
9.8
3.41.7
12.3
19.3
4.9
13.7
6.4
13.6
4.1
16.8
3.92.2
14.0
18.5
6.7
0
5
10
15
20
Prod
ucer
Dur
able
s
Mat
eria
ls a
nd P
roce
ssin
g
Cons
umer
Dis
cret
iona
ry
Util
ities
Hea
lth C
are
Ener
gy
Cons
umer
Sta
ples
Tech
nolo
gy
Fina
ncia
l Ser
vice
s
REIT
s
Schroder US Smaller Companies Russell 2000
41% 44% 43% 44%51% 51% 48%
54% 54%
02468101214
0%10%20%30%40%50%60%
12/3
1/20
10
12/3
0/20
11
12/3
1/20
12
12/3
1/20
13
12/3
1/20
14
12/3
1/20
15
12/3
0/20
16
12/2
9/20
17
3/29
/201
8
Other HCBiotech & pharmaBiotech & pharma as a % of health care weight
1.60
1.40
-0.21
-0.37
-0.63
-1.84
-7.03
-8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3
Medical Services
Medical & Dental Instruments
Medical Equipment
Health Care Management
Health Care Facilities
Health Care Services
Biotech & pharma
Schroders US Small relative to the Russell 2000
Spotlight on health care
7
Schroders US Small Cap
Source: FactSet of March 31, 2018 in USD. Sector weights for the account and the Benchmark index are for illustrative purposes only and subject to change and should not be viewed as an investment recommendation. Portfolio weights are based on a representative account.
Schroders US Small health care positioning Russell 2000 health care sector
Biotech and specialty pharma now constitute 54% of the health care sector and over 9% of the benchmark
Out of the 222 biotech & pharma companies in the Russell 2000, only 22 have positive 12 month trailing earnings (10%)
Despite the strong one year returns at the index level, the one year median return for biotech and pharma is negative.Average return: 15.28%Median return: -4.86%
A big deal Buying the dream Feast or famine
0
50
100
150
200
250
300
350
400
450
2018 2019 2020 2021 2022 2023 2024 2025 2026$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
2011
2012
2013
2014
2015
2016
2017
E
2018
E
2019
E
2020
E
2021
E
2G 3G 4G LTE 5G
Technology: a positioning snapshot
8
Source: Bank of America, Merrill Lynch Global Research estimates. Forecast risk warning: Please see the information slide at the end of this presentation.
Estimated North America IoT volumes ($bn) Mobile infrastructure TAM by wireless technology
– Defensible positions in vertical industries
– IT/Services process outsourcing– Underweight cloud oriented
Software as a Service (SaaS) due to valuations and narrow moats
– Semiconductor companies with greater infiltration to auto and industrials
– Packet optical communications– Server based components for
memory/storage
Software cloud SemiconductorsCommunications and computing infrastructure
$bn $bn
Entegris, Inc.
9
Chip innovation has moved beyond physical scaling
Long-term secular growth opportunity
Source: Schroders, Company Reports. Stocks shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.Forecast risk warning: Please see the information slide at the end of this presentation.
Building blocks for growth
It’s no longer about increasing speed just through smaller transistors….
…it’s about finding ways to build more advanced chips.
Materials innovation is the key driver of this new approach
3 to 5 year CAGR
Materials intensityIncreasing contaminationcontrol SAM expansionShare gains
~2–3%Global GDP
~1–2%
~2–3%
Wafer starts in excess of GDP
5% to 8%expected
annual growth
Navigating the Amazon
10
All-conquering Amazon elicits fear in corporate boardrooms
Distribution models under threat by Amazon
Source: Statista, Recode, FactSet. For illustrative purposes only and should not be viewed as a recommendation to buy or sell.
0
500
1,000
1,500
2,000
2,500
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Number of Amazon mentions on publiclyavailable conference calls
Misunderstood threat = mispriced opportunities
Traditional retail
Dentalsupply
Cloud(AWS)Auto parts
GroceryIndustrial distributors
Feelingthe
impact
Hudson, Ltd
11
Competitive advantages
A travel retailer
Source: Schroders, company report, ACI-NA Concessions Benchmarking Survey, Airport Revenue News (ARN).For illustrative purposes only and should not be viewed as a recommendation to buy or sell. Forecast risk warning: Please see the information slide at the end of this presentation.
– Average airport dwell time is 66–75 minutes increases spend
Captive audience
– Favorable customer demographics
Higher propensity to spend
– Customer driven by a combination of impulses and immediate needs
Insulated from e-commerce
– Complex operating environment creates a barrier to entry
Regulatory environment
Diversified product categories
37%
15%12%
9%
7%
6%5%
5%4%Diversified salesFood & BeveragePerfume & CosmeticsFashionLiteratureOtherWatches, Jewelry, AccessoriesWine & SpiritsElectronicsTobacco
Historical and projected North American passenger volumes
0
1
2
3
2010 2013 2016 2019 2022 2025
Domestic passengers International passengers
(Billions)
Schroder US Smaller Companies Fund
12
Performance attribution: 1 year to 30 April 2018
Source: Schroders, FactSet, Gross of fees in GBP. Sectors shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.
– Stock selection contributes most in energy and financial services– Value added from underweights to REITs– Stock selection detracts most in health care and consumer discretionary– Underweight to technology detracts
Performance attributionUK-RUT Small vs. Russell 20004/30/2017 to 4/30/2018British Pounds
UK-RUT Small Russell 2000 Attribution analysisRussell sectors extended Average
weightTotal
returnContribution
to returnAverage
weightTotal
returnContribution
to returnAllocation
effectSelection +Interaction
Totaleffect
REIT 4.43 -0.92 -0.01 7.50 -8.54 -0.55 0.38 0.36 0.73Financial Services 18.33 5.60 0.98 18.62 3.02 0.55 0.03 0.42 0.45Utilities 2.65 8.25 0.21 4.54 -3.49 -0.15 0.14 0.30 0.45Energy 3.26 14.70 0.40 3.28 -2.07 0.03 -0.11 0.48 0.37Materials & Processing 5.50 -0.18 0.06 6.71 -2.87 -0.21 0.12 0.15 0.27Producer Durables 15.98 4.33 0.66 13.80 3.79 0.53 0.02 0.01 0.02Technology 12.56 9.69 1.03 14.20 8.17 1.23 -0.16 0.15 -0.01ETFs & Futures 0.92 6.09 0.01 -- -- -- -0.02 -- -0.02Consumer Staples 2.22 -6.28 -0.18 2.45 -4.88 0.13 0.05 -0.07 -0.02Cash 7.70 -3.99 -0.31 -- -- – -0.66 -- -0.66Consumer Discretionary 14.90 -1.23 -0.12 13.37 6.61 0.86 0.05 -1.13 -1.09Health Care 11.56 -0.12 0.50 15.52 18.81 2.59 -0.30 -1.73 -2.03Total 100.00 3.23 3.23 100.00 4.76 4.76 -0.47 -1.07 -1.53
++--
The market
19.92%
5.72%
90
95
100
105
110
115
120
125
130
Mar
-17
Apr-
17
May
-17
Jun-
17
Jul-1
7
Aug-
17
Sep-
17
Oct
-17
Nov
-17
Dec
-17
Jan-
18
Feb-
18
Mar
-18
Russell 2500 Growth – Total Return IndexRussell 2500 Value – Total Return Index
18.82
-1.52
-10
-5
0
5
10
15
20
25
30
Mar
-17
Apr-
17
May
-17
Jun-
17
Jul-1
7
Aug-
17
Sep-
17
Oct
-17
Nov
-17
Dec
-17
Jan-
18
Feb-
18
Mar
-18
High momentumLow momentum
Market trends: momentum and growth lead
14
Russell 2500 Growth vs. Russell 2500 Value
Headwinds for our style
Source: FactSet as of 31 March, 2018.
High momentum stocks vs. low momentum stocks*
-10.6-7.0-6.4
-4.5-2.2-1.4-1.2
3.87.17.37.57.58.78.99.710.1
11.913.6
15.420.8
-20 -10 0 10 20 30
High dividend growthLow - high fwd P/E
Low - high EV-EBITDAHigh LTM total yield
Low - high capexHigh cash & ST Inv/MC
Large - small market capLTM FCFF Yield
Incremental free cash flowLow - high short interest
High - low earnings qualityHigh foreign sales
Low - high PTBVBeta
Prior year top performersReturn on equity
MomentumHigh net cash - high net debt
EPS growthSales growth
Factor performance
15
Thematic basket (% change)January 2017 to present
Source: Wolfe Research as of 19 April, 2018. Universe is the largest 1,001–2,500 market cap companies.
Since the beginning of last year, “Growth” has been the big winner
Companies less exposed to rising rates have been good performers
Momentum has been strong, given strong leadership consistency
Somewhat surprisingly, “Quality” metrics have also outperformed
Earnings based “Value” metrics have been big laggards
Within the SMID-cap universe, Dividend themes have underperformed
US economy is solid
16
%
GDP is rising and the outlook is favourable
Source: Schroders, FactSet as of 20 April, 2018. Forecast risk warning: Please see the information slide at the end of this presentation.
3.0%
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Q2
2003
Q4
2003
Q2
2004
Q4
2004
Q2
2005
Q4
2005
Q2
2006
Q4
2006
Q2
2007
Q4
2007
Q2
2008
Q4
2008
Q2
2009
Q4
2009
Q2
2010
Q4
2010
Q2
2011
Q4
2011
Q2
2012
Q4
2012
Q2
2013
Q4
2013
Q2
2014
Q4
2014
Q2
2015
Q4
2015
Q2
2016
Q4
2016
Q2
2017
Q4
2017
Q2
2018
e
Q4
2018
e
Q2
2019
e
Q4
2019
e
US GDP YoY
2018–2019Estimated
Small business – heart of US economy
17
US total employment
Optimism begets optimism
Source: FactSet as of 31 March, 2018.
Small business optimism
Small and Mid businesses:83% of US employment
S&P companies17% of US employment
104.70
80
90
100
110
1986
1988
1990
1993
1995
1997
2000
2002
2004
2007
2009
2011
2014
2016
Recession Periods – United States
NFIB Small Business Economic Trends, Optimism 1986=100, NSA, Index – United States – LHS
%
Employment remains high
18
Unemployment and underemployment1
Steady job creation leads to falling unemployment
1Schroders, FactSet as of 30 April, 2018.2FactSet as of 30 April, 2018.
New job creation2
Thousands
3.90
7.40
0
2
4
6
8
10
12
14
16
18
20
Mar
-94
Mar
-95
Mar
-96
Mar
-97
Mar
-98
Mar
-99
Mar
-00
Mar
-01
Mar
-02
Mar
-03
Mar
-04
Mar
-05
Mar
-06
Mar
-07
Mar
-08
Mar
-09
Mar
-10
Mar
-11
Mar
-12
Mar
-13
Mar
-14
Mar
-15
Mar
-16
Mar
-17
Mar
-18
Unemployment Rate, U-3 – Percent, Sa – United States
Unemployment Rate, U-6 – Percent, Sa – United States
-800
-600
-400
-200
0
200
400
600
Jan
-04
Jan
-05
Jan
-06
Jan
-07
Jan
-08
Jan
-09
Jan
-10
Jan
-11
Jan
-12
Jan
-13
Jan
-14
Jan
-15
Jan
-16
Jan
-17
Jan
-18
Employees On Non-Farm Payrolls, Change From Previous Month (Unrevised), Sa, Thous Persons – United States
Earnings, spending and inflation
19
Wages and spending1
Spending rising, inflation benign (for the moment)
1AHE Source: FactSet as of 31 March, 2018. PCE Source: FactSet as of 31 March, 2018.2CPI-U Source: FactSet as of 31 March, 2018. ECI Source: FactSet as of 31 March, 2018.
Inflation measures2
2.72
4.41
-4
-3
-2
-1
0
1
2
3
4
5
6
Mar
-07
Sep-
07M
ar-0
8Se
p-08
Mar
-09
Sep-
09M
ar-1
0Se
p-10
Mar
-11
Sep-
11M
ar-1
2Se
p-12
Mar
-13
Sep-
13M
ar-1
4Se
p-14
Mar
-15
Sep-
15M
ar-1
6Se
p-16
Mar
-17
Sep-
17M
ar-1
8
USA – Avg Hourly Earnings 12 Month % Change
Personal Consumption Expenditures, Y/Y
2.40
2.70
-2
-1
0
1
2
3
4
5
6
Mar
-07
Sep-
07M
ar-0
8Se
p-08
Mar
-09
Sep-
09M
ar-1
0Se
p-10
Mar
-11
Sep-
11M
ar-1
2Se
p-12
Mar
-13
Sep-
13M
ar-1
4Se
p-14
Mar
-15
Sep-
15M
ar-1
6Se
p-16
Mar
-17
Sep-
17M
ar-1
8
CPI-U, All Items, US City Average, Y/Y, NSA, Percent - United States
Employment Cost Index, Total Compensation All Civilian All WorkersNsa 12 Month % Change
% %
Interest rates
20
US 10-Year Treasury Yield
Rising with curve flattening
Source: FactSet as of 24 April, 2018.
US 2-10 Year Treasury Yield Spread
3.0%
1.0
1.5
2.0
2.5
3.0
3.5
Jun-
16
Aug-
16
Oct
-16
Dec
-16
Feb-
17
Apr-
17
Jun-
17
Aug-
17
Oct
-17
Dec
-17
Feb-
18
Apr-
18
US Govt Yield – 10 Yr
% %
0.52%
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Jun-
16
Aug-
16
Oct
-16
Dec
-16
Feb-
17
Apr-
17
Jun-
17
Aug-
17
Oct
-17
Dec
-17
Feb-
18
Apr-
18
2–10 Year US Govt Yield Spread
Not a riskless world
21
Index debt levels
Are small cap companies prepared for a rise in rates?
Source: Factset as of 31 March, 2018.
Floating or fixed?
4.86
4.28
2.71
0 2 4 6
Russell 2000
Russell 2500
S&P 500
Debt/EBITDA
50%
18%
50%
82%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Russell 2000 S&P 500
Floating Interest Rates Fixed Interest Rates
Valuations
22
Russell 2000 absolute valuations
Changing for the better (a bit)
Source: Bank of America Merrill Lynch, Jefferies. Data as of March 31, 2018. *P/E excludes negative earnings.
Russell 2000 vs. Russell 1000 relative valuations
0612182430
048
121620
1Q79 1Q82 1Q85 1Q88 1Q91 1Q94 1Q97 1Q00 1Q03 1Q06 1Q09 1Q12 1Q15 1Q18
US 10 year rate – LH scale PE Forward – RH scale Long-term Avg
Forecast P/E*
0.50.70.91.11.31.5
1Q79 1Q83 1Q87 1Q91 1Q95 1Q99 1Q03 1Q07 1Q11 1Q15
Russell 2000 valuations relative to Russell 1000 Long-term Avg
Forecast P/E*
Small caps expensive
Small caps cheap
Small caps expensive
Small caps cheap
2018 US Tax Bill
23
Key items affecting companies
Positive impact on earnings
Source: Schroders, FactSet as of 2 April, 2018.
2018 earnings growth estimates before and after the tax bill
The statutory corporate tax rate drops from 35% to 21%, effective January 1, 2018.
US will move to a territorial tax system which means US taxes will be due only on US sourced earnings.
Overseas cash held by US companies will now be coming back to the US.
Immediate 100% expensing of qualified capital investments. Expect an increase in capital expenditures.
Net-interest deduction: companies will be able to deduct net-interest up to 30% of EBITDA through the end of 2021.
All leads to higher earnings estimates for 2018
13.0%
20.9%19.7%
30.9%
0%
5%
10%
15%
20%
25%
30%
35%
Before the tax bill After the tax bill
S&P 500 Russell 2000
Thank you
The appendix
Small – clear performance pattern
26
Why diversification of alpha sources is important
Source: Schroders. Monthly observations for the composite, gross of fees, between 31 January, 2003 and 31 March, 2018. Performance shown is past performance. Past performance is not a guide to future performance. The value of investments can go down as well as up and is not guaranteed.1Pattern based on US domiciled representative account, net of fees 1/31/2003 to 3/31/2018.
Market environment Falling(index <0% in a month)
Strongly rising(index >3% in a month)
Number of months 66 63
Percentage of months outperforming 89% 14%
Pattern1 Down market capture: 74.0 Up market capture: 85.4
We truncate the left (negative) tail
By giving up a portion of the right tail
Schroder US Smaller Companies Fund
27
Periods ending 30 April 2018 (%)(Periods greater than one year are annualised)
Performance – net of fees
Source: Schroders, bid to bid, net of fees in GBP as at 30 April 2018, based on Z Acc Units, GBP (Z Acc units linked to A Acc prior to 2014). Index lagged, periods greater than 1 year are annualized. Source of ratings: FE Trustnet, The Adviser Centre and Morningstar, as at 30 April 2018. Please see Important Information at the end of this presentation.
Calendar year performance (%)2
YTD 2018 1 year 3 years 5 years 10 years Since incept.
Schroder US Smaller Cos Fund -2.1 2.5 13.3 15.1 12.7 17.3
Russell 2000 TR Lagged GBP -1.8 4.0 13.4 14.7 13.5 12.1
Outperformance -0.3 -1.5 -0.1 +0.4 -0.8 +5.2
Past performance is not a guide to future performance and may not be repeated.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Schroder US Smaller Cos Fund -12.2 24.1 25.4 -4.6 5.7 33.8 16.8 3.6 42.7 4.7
Russell 2000 TR Lagged GBP -12.2 19.6 31.7 -4.4 8.0 38.2 12.5 0.8 46.0 4.8
Outperformance 0.0 +4.5 -6.3 -0.2 -2.3 -4.4 +4.3 +2.8 -3.3 -0.1
Schroder US Smaller Companies Fund
28
Risk factors
– The fund may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the fund, both up or down, which may adversely impact the performance of the fund.
– The fund can be exposed to different currencies. Changes in foreign exchange rates could create losses.
– Equity prices fluctuate daily, based on many factors including general, economic, industry or company news.
– In difficult market conditions, the fund may not be able to sell a security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares.
– Failures at service providers could lead to disruptions of fund operations or losses.– The counterparty to a derivative or other contractual agreement or synthetic financial product
could become unable to honour its commitments to the fund, potentially creating a partial or total loss for the fund.
– A derivative may not perform as expected, and may create losses greater than the cost of the derivative.
– The fund uses derivatives for leverage, which makes it more sensitive to certain market or interest rate movements and may cause above-average volatility and risk of loss.
Diversified alpha sources
29
US Small and Mid Cap Strategy historical allocations (weighted)
Source: Schroders, FactSet, as of 30 April, 2018. Source: Schroders, Historical allocations are shown since December 2005 are based on a representative account.
56%
36%
8%
0
10
20
30
40
50
60
70
Dec
-05
Jun-
06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Dec
-08
Jun-
09
Dec
-09
Jun-
10
Dec
-10
Jun-
11
Dec
-11
Jun-
12
Dec
-12
Jun-
13
Dec
-13
Jun-
14
Dec
-14
Jun-
15
Dec
-15
Jun-
16
Dec
-16
Jun-
17
Dec
-17
Mispriced Growth Steady Eddie Turnaround
Schroder US Mid Cap Fund
30
Portfolio vs. index
Sector weights – 30 April 2018
Source: FactSet, Style Research as of 30 April, 2018 in GBP. Sector weights for the account and the Benchmark index are for illustrative purposes only and subject to change and should not be viewed as an investment recommendation. *Active share is a measure of the percentage of stock holdings in a portfolio that differ from the benchmark index.
12.6
9.08.0
3.4 2.8 2.3
17.5
14.8
19.5
4.5
12.4 11.8
7.1
4.2 4.7
2.6
15.413.9
18.7
9.1
0
5
10
15
20
25
Technology HealthCare
Materials andprocessing
Utilities Energy Consumerstaples
Producerdurables
Consumerdiscretionary
Financialservices
REITs
Schroder US Mid Cap Russell 2500
%Active share* = 89.7%
Spotlight on health care
31
Schroders US Small & Mid Cap
Source: FactSet of March 31, 2018 in USD. Sector weights for the account and the Benchmark index are for illustrative purposes only and subject to change and should not be viewed as an investment recommendation. Portfolio weights are based on a representative account.
Schroders US Smid health care positioning Russell 2500 health care sector
Biotech and specialty pharma now constitutes almost 50% of the health care sector and over 6% benchmark
Out of the 240 biotech & pharma companies in the Russell 2500, only 27 have positive 12 month trailing earnings (11%)
Despite the strong one year returns at the index level, the one year median return for biotech and pharma is negativeAverage return: 15.29%Median return: -5.29%
A big deal Buying the dream Feast or famine
1.55
1.23
0.41
0.35
-0.35
-1.45
-4.84
-6 -4 -2 0 2
Medical & Dental Instruments
Medical Services
Medical Equipment
Health Care Facilities
Health Care Management
Health Care Services
Biotech and pharma
Schroders US Smid relative to the Russell 2500
34.7% 37.6% 36.7% 41.9%
45.5% 41.0%38.5% 49.2% 47.3%
02468101214
0%
10%
20%
30%
40%
50%
60%
12/3
1/20
10
12/3
1/20
11
12/3
1/20
12
12/3
1/20
13
12/3
1/20
14
12/3
1/20
15
12/3
1/20
16
12/3
1/20
17
3/31
/201
8
Other HCBiotech & pharmaBiotech & pharma as a % of a health care weight
Schroder US Mid Cap Fund
32
Performance attribution: 1 year to 30 April 2018
Source: Schroders, FactSet, Gross of fees in GBP. Sectors shown are for illustrative purposes only and should not be viewed as a recommendation to buy or sell.
– Stock selection contributes most in most in financials– Value added from underweights to REITs– Stock selection detracts most in health care and consumer discretionary– Cash allocation detracts
Performance attributionUK-RUT SMID vs. Russell 25004/30/2017 to 4/30/2018British Pounds
UK-RUT SMID Russell 2500 Attribution analysisRussell sectors extended Average
weightTotal
returnContribution
to returnAverage
weightTotal
returnContribution
to returnAllocation
effectSelection +Interaction
Totaleffect
REIT 3.86 -4.61 -0.11 9.67 -8.08 -0.72 0.78 0.13 0.91Financial Services 18.10 10.63 1.79 18.12 9.27 1.61 0.03 0.18 0.21Materials & Processing 6.23 5.14 0.27 7.33 1.62 0.14 -0.01 0.17 0.16Technology 11.63 12.88 1.31 12.16 10.55 1.21 -0.04 0.17 0.14Utilities 3.50 3.49 0.18 4.35 1.41 0.09 0.03 0.09 0.12ETFs & Futures 0.97 -5.66 -0.09 -- -- -- -0.02 -- -0.02Energy 2.63 -13.27 -0.37 4.18 -0.69 0.05 -0.08 -0.33 -0.41Producer Durables 18.19 1.87 0.33 15.63 4.57 0.72 0.04 -0.57 -0.54Cash 7.72 -2.94 -0.24 -- -- -- -0.56 -- -0.56Consumer Staples 2.97 -28.54 -0.91 2.73 -5.49 -0.16 -0.03 -0.74 -0.77Health Care 10.96 -3.41 0.09 11.85 11.03 1.27 -0.03 -1.18 -1.21Consumer Discretionary 13.25 -3.32 -0.54 13.97 5.29 0.72 -0.05 -1.20 -1.24Total 100.00 1.72 1.72 100.00 4.93 4.93 0.05 -3.26 -3.21
++--
Schroder US Mid Cap Fund
33
Periods ending 30 April 2018 (%)(Periods greater than one year are annualised)
Performance – net of fees
Source: Schroders, bid to bid, net of fees in GBP as at 30 April 2018, based on Z Acc Units, GBP (Z Acc units linked to A Acc prior to 2014). Index lagged, periods greater than 1 year are annualized.Source for ratings: Fund Calibre, Trustnet, Rayner Spencer Mills and Morningstar as at 30 April 2018. Please see Important Information at the end of this presentation.
Calendar year performance (%)
YTD 2018 1 year 3 years 5 years 10 years Since incept.
Schroder US Mid Cap Fund -3.9 1.3 13.1 15.8 13.1 13.0
Russell 2500 TR Lagged GBP -2.4 4.4 12.8 14.5 13.8 12.5
Outperformance -1.5 -3.1 +0.3 +1.3 -0.7 +0.5
Past performance is not a guide to future performance and may not be repeated.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Schroder US Mid Cap Fund -9.9 23.4 21.8 -2.1 4.0 33.6 18.8 6.7 42.0 5.7
Russell 2500 TR Lagged GBP -15.1 25.6 31.4 -2.6 9.7 35.8 14.9 2.0 41.9 6.6
Outperformance +5.2 -2.2 -9.6 +0.5 -5.7 -2.2 +3.9 +4.7 +0.1 -0.9
Schroder US Mid Cap Fund
34
Risk factors
– The fund may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the fund, both up or down, which may adversely impact the performance of the fund.
– The fund can be exposed to different currencies. Changes in foreign exchange rates could create losses.
– Equity prices fluctuate daily, based on many factors including general, economic, industry or company news.
– In difficult market conditions, the fund may not be able to sell a security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares.
– Failures at service providers could lead to disruptions of fund operations or losses.– The counterparty to a derivative or other contractual agreement or synthetic financial product
could become unable to honour its commitments to the fund, potentially creating a partial or total loss for the fund.
– A derivative may not perform as expected, and may create losses greater than the cost of the derivative.
– The fund uses derivatives for leverage, which makes it more sensitive to certain market or interest rate movements and may cause above-average volatility and risk of loss.
Experienced leadership, experienced team
35
Average investment experience: 23 years
Supported by: 3 traders; 1 product executive; 1 portfolio management assistant, and 2 additional support staff
Source: Schroders, as of 10 January, 2018.
Robert Kaynor, CFAPortfolio Manager24 years of experienceMaterials, Producer Durables, Consumer2013
Jenny JonesPortfolio Manager
38 years of experienceMaterials
2002
Steve Kirson, CFA34 years’ experienceTechnology, Telecom2005
Joanna Wald17 years’ experienceConsumer, Producer Durables2013
Grant Toch17 years’ experienceFinancials2015
Cezary Nadecki, CFA20 years’ experienceEnergy, Utilities, Producer Durables2004
Peter Wen23 years’ experienceHealth Care2010
David Speyer, CFA13 years’ experienceDurables/REITs/Media2009
Fred Schaefer31 years’ experience
Product Mgr.2007
Sarah Bratton11 years’ experienceProduct Mgr.2011
DisclaimerFor professional investors or advisers only. This material is not suitable for retail clients.
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.
Schroders has expressed its own views and these may change. The data contained in this document has been sourced by Schroders and should be independently verified before further publication or use. This presentation is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The information provided is not intended to constitute investment advice, an investment recommendation or investment research and does not take into account specific circumstances of any recipient. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Information herein is believed to be reliable but Schroder Unit Trusts Limited (Schroders) does not warrant its completeness or accuracy. No responsibility can be accepted for error of fact or opinion. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.
The forecasts included in this document should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. We accept no responsibility for any errors of fact or opinion and assume no obligation to provide you with any changes to our assumptions or forecasts. Forecasts and assumptions may be affected by external economic or other factors.
Source for ratings: Fund Calibre, Trustnet, Rayner Spencer Mills and Morningstar as at 30 April 2018. © 2018 Morningstar. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. For more detailed information about Morningstar's Analyst Rating, including its methodology, please go to: http://corporate.morningstar.com/us/documents/MethodologyDocuments/AnalystRatingforFundsMethodology.pdf
Issued in May 2018 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 4191730 England. Authorised and regulated by the Financial Conduct Authority. UK12853
36
ContactAdvisory sales desk: +44 (0) 207 658 3894
Asset Manager sales desk: +44 (0) 207 658 3210
Schroder Investment Management Limited,
31 Gresham Street, London EC2V 7QA.
schroders.com
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