ii ACE 40 investments:
Schroder Global Sustainable Value Equity

The fund is managed by three managers, Simon Adler, Liam Nunn and Roberta Barr. They form part of the highly regarded Schroder Global Value team which has been led by Kevin Murphy and Nick Kirrage since July 2006. The team is made up of nine analysts/managers in total who all have stock research responsibilities. 

The strategy takes the Global Value team’s distinctive and repeatable value process and adds a sustainability objective. It will only invest in those companies that the team identify as undervalued ESG ESG (environmental, social and governance) leaders. This fund offers customers a value approach that invests in companies that have a positive impact on society and are industry leading. The fund maintains a higher overall sustainability score than the MSCI World index, based on the manager’s own rating system though Schroders proprietary sustainability tool SustainEx.

SustainEx produces an aggregate measure of a company’s social impact, based on measures of the positive and negative externalities the firm has created. It quantifies the extent of a company’s net credit or debit imposed on society, and the risks they face if society were to send a bill for these costs. 

Compared to its non-sustainable value fund (Schroder Global Recovery), the most significant differences are for the sustainable fund having higher weightings to technology, communication services, and consumer cyclicals. In addition, the sustainable fund has no exposure to basic materials, utilities and energy. 

The portfolio exhibits strong value characteristics and is at a significant discount to the market on both a price-to-earnings and price/book basis. The fund’s holdings are driven solely by where the team find the best value opportunities, and as a result, the portfolio can exhibit significant sector, country, and market-cap deviations relative to the benchmark and peers.

We expect the fund to outperform over a market cycle, however returns are likely to be lumpy and the fund’s value style bias may lead to underperformance during periods of market weakness. The contrarian nature of this fund’s approach requires investors who are patient and can endure the volatility that accompanies this strategy. 

While this fund was only converted to a sustainable fund in August 2021 and therefore does not have a long track record, we believe it has sufficient overlap with funds managed by the team to give us confidence about the fund’s likely return profile and the managers ability to add value in the long term. 

Sustainable criteria

ii ACE sustainable style: Considers. This means the fund carefully considers an often wide range of ethical and/ or environmental, social and governance (ESG) issues or themes when balancing positive and negative factors.

SRI Style: Sustainability Tilted. These funds integrate sustainability considerations into their investment process in order to help to make better investment decisions, but investments are not driven by sustainability themes. These funds may invest in most company types and may be ‘overweight’ in companies with higher standards and ‘underweight’ in companies with poor practices – rather than necessarily excluding them. They may work to encourage more sustainable business practices through stewardship activity.