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Schroder Recovery

Elite Rated by FundCalibre

A patient and deep value-driven fund investing in companies valued at less than their true worth and waiting for a correction. The downside to patient investing is that “it doesn’t work every day”. Recovery investors need a hard head and an open mind – being contrarian can be bruising but very profitable – and a long-term investment horizon, which is increasingly hard to do in today’s world, but the track record of this fund suggests that it is not impossible.

Company Description

Founded in London in 1804, today Schroders operates in more than 25 countries, employing more than 3,500 people, close to the markets in which they invest. With more than 35 offices worldwide, Schroders is listed on the London Stock Exchange and invests in a range of asset classes including equity, fixed income, multi-asset and alternatives.

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Fund Manager

Nick Kirrage and Kevin Murphy have worked together at Schroder for over 13 years and head a five-man team that runs global income and recovery mandates. All five started their careers as investment analysts and Nick reckons he spends half his day with his nose buried in company report and accounts; an essential attribute for a value-driven approach.

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Recovery investing requires patience, it doesn’t work every day.

Kevin Murphy - Fund Manager

The Investment Process

The starting point is a very basic screen to indicate companies that are valued at low cyclically adjusted price earnings ratios (CAPE). Some companies will disappoint and some will go bust, but the winners will make up for that. Sometimes the catalyst for change takes time and often the stocks will get even cheaper. Value managers are not often wrong, but nearly always early.

Risk

A quietly aggressive value driven fund looking outside the mainstream “safe” large-cap UK equities. As a result there is the possibility of company failures and disappointments where the catalyst for change just does not arrive. Currently they also hold 15% in overseas stocks.

Our Opinion

This recovery fund has been run by the same lead managers since 2006, with a continuity of process and a very consistent track record. Their deep value style does lead to shorter periods of underperformance but their core discipline of buying cheap stocks gives good long-term outperformance.

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