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Schroder Digital Infrastructure
Schroder Digital Infrastructure fund seeks to take advantage of the ever-increasing demand for digital infrastructure and the sustainable transition to a digital economy. It holds around 40 stocks invested around the world in a mixture of emerging and developed markets. ESG factors are a critical part of the fund’s process and the worst ESG performers are excluded from its universe.
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Tom Walker is Co-Head of Global Real Estate Securities. He holds a BA (Hons) in Politics from the University of Newcastle Upon Tyne and a Graduate Diploma in Real Estate from London South Bank University. Tom is a fully qualified Chartered Surveyor and a member of the Royal Institution of Chartered Surveyors (RICS).
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Hugo Machin joined Schroders in July 2014 as Fund Manager for Global Property Securities. He brings over 15 years of real estate experience to his role. Prior to Schroders, Hugo was the Head of European Listed Real Estate at AMP Capital from 2006 to 2014, where he was instrumental in establishing AMP's London office for the AMP Global Property Securities Fund. Before AMP Capital, he worked at ING Investment Management in Sydney from 2004 to 2006 and at the Wellcome Trust from 1999 to 2004, managing a commercial property portfolio. Hugo holds a BA (Hons) in English Literature from Durham University, an MSc in Real Estate Finance and Investment from Reading University, and a Diploma in Cross Border Valuation from Oxford Saïd Business School.
Tom Walker is Co-Head of Global Real Estate Securities. He holds a BA (Hons) in Politics from the University of Newcastle Upon Tyne and a Graduate Diploma in Real Estate from London South Bank University. Tom is a fully qualified Chartered Surveyor and a member of the Royal Institution of Chartered Surveyors (RICS).
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Company Description
Founded in London in 1804, today Schroders operates in more than 25 countries, employing more than 5,000 people, close to the markets in which they invest. Schroders is listed on the London Stock Exchange and invests in a range of asset classes including equity, fixed income, multi-asset and alternatives. The group was awarded the Elite Equities Provider Rating in 2015, 2016 and 2017.
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Talking Factsheet
Investment process
Schroder Digital Infrastructure has been launched by the same team behind the successful Schroders Global Cities Real Estate fund. The managers have over 20 years’ experience investing in digital infrastructure and, having seen the alpha this area was generating in that strategy, they have now decided to launch a dedicated fund focusing solely on digital infrastructure.
The fund’s philosophy is simple. Technological advances are driving massive demand for data and therefore digital infrastructure. Digital transformation is impacting every industry. Access to the internet is now ‘mission critical’ for society and our whole economy is now dependent on it. Digital infrastructure is critical for future economic growth.
Despite this, our digital infrastructure is way behind where it needs to be. Half the global population still don’t even have access to the internet. There is an opportunity in both emerging and developed markets: emerging markets still need to build out digital infrastructure, whilst developed markets need to evolve and upgrade it.
The fund has three main areas it will invest in: macro towers, fibre optic cables and data centres. The fund has a data driven investment process and the investable universe consists of roughly 300 stocks and REITS. The team then conducts detailed fundamental research to determine the best businesses for the portfolio.
Risk
Schroder Digital Infrastructure is concentrated with around 40 holdings which are spread across the world. Investments are split across three main areas: phone towers, data centres and fibre optic cables. Phone towers and data centres generally form the majority of the portfolio, so performance will be dictated by sector and stock-specific returns. A maximum of 10% can be held in cash.
ESG
ESG - Integrated
ESG is a critical part of the investment process of this fund. Every potential stock is given an ESG score. The highest rated companies will manage and develop infrastructure which promotes connectivity in a sustainable manner from an environmental and social perspective. Those stocks in the bottom quartile are excluded from the investment universe.
ESG analysis helps determine the sustainability of a company’s earnings and potential risks. Schroders ESG work begins with its SustainEx tool, developed in house by a 25-man central ESG team. Sustainex has won a number of awards and continues to be upgraded all the time. It quantifies the positive and negative impacts companies have on society. Most approaches measure impact relative to a benchmark, whereas SustainEx calculates a quantifiable overall impact. There are currently 47 positive and negative externalities which have been drawn from over 400 academic studies and are applied to 9,000 global companies. The tool helps fund managers to identify previously unaccounted for ESG risks and helps them to build these risks into their valuation framework.
Each individual investment team has its own ESG specialist on the team. In addition to SustainEx, analysts also use the Context tool. This tool allows analysts to add their own ESG input and they are encouraged to do so. ESG is also a direct input in the valuation process with higher discount rates applied to weak ESG companies. ESG also helps shape portfolio construction. Those stocks with a higher ESG risk may have a reduced weight in the portfolio, or if the risk is high enough, no position at all.
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