Schroder Global Real Estate Securities Fund (previously Schroder Global Property Securities Fund)

A bottom up actively managed property fund with a team with a proven track record; the process is governed by risk and valuation using flexible inputs.

With a rising interest environment there is an argument that fixed income investments i.e. bonds will suffer. Another area which some argue will suffer is property. The reason is that many property funds have moved away from pure bricks and mortar to a basket of REITS (Real Estate Investment Trusts).

This is true where the REIT is heavily indebted and / or badly managed and therefore investors need to consider their options carefully. Of course investors could go for bricks and mortar but many investors remain raw about the closure of many of these funds in 2008 due to liquidity problems.

Of course investors could just ignore property, ignore bonds but that leaves them with cash or equities and therefore for a balanced portfolio a holding in property should be considered. The managers of the fund suggest this should be around 9% to 10%.

The fund which we have recently met the managers for is the Schroder Global Property Fund. Two things investors need to be aware of when looking at this fund – firstly it does invest REITS which we will cover further, and secondly performance has been patchy.

We will cover the second point in this introduction as this is important. The fund was previously outsourced to a third party. The management has now been brought in-house and is managed by Tom Walker and Hugo Machin. They only took over the management of the fund in July 2014 having previously worked at AMP Capital for over 8 years where they managed a property fund worth over $6.5 billion.

More importantly is their performance over that period which was top quartile over 1, 3 and 5 years. Fundamentally Schroders recruited them to replicate the success they had had. We have stressed this many times and that is just because someone has done well before it doesn’t guarantee success in the future and investors need to consider this if they consider this is a fund to invest in.

The managers have started to move the portfolio to what they consider is their unique style of management. Reducing or removing positions in the portfolio, adding in new holdings and increasing existing holdings. It may therefore take time for investors to see any change in performance as the fund is modelled towards their style of investing.

In this update the managers talked about what they feel is a unique approach to investing and why their fund is different to others currently being promoted.

Fund Facts Morningstar

Notes

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