Schroders has merged away a pair of UK equity funds, which were spotlighted for poor performance in its second value assessment.
An update posted to the firm’s website on Thursday revealed the Schroder UK Equity and Schroder UK Opportunity funds would be rolled into the Schroder UK Alpha Plus fund as part of a “strategic restructuring” of its UK equities desk. All three strategies are managed by Bill Casey and Nick Kissack.
Unitholders approved the changes on 18 February.
Both have had a difficult run due to their value bias. They were among the nine funds that received the lowest score for performance in Schroders’ second assessment of value report (AoV).
UK Opportunities had already been named and shamed for performance and stock specific issues in Schroders’ debut AoV report the year before. This prompted the firm to replace manager Matt Hudson, who has since taken over for Dan Hanbury on the River and Mercantile UK Equity Income fund.
Last year, UK Equity and UK Opportunities delivered a positive return of 13.8% and 13.7% respectively, as markets rotated away from expensive growth stocks toward cheaper value names. But they still fell short of the FTSE All-Share’s gains of 18.3%.
Schroder UK Alpha Plus, which uses the same benchmark, returned 11.6% in 2021. It invests in a portfolio of 30-35 “high quality” stocks with “high returning cashflow streams, regardless of sector or size”.
Schroders said the merger would allow UK Equity and UK Opportunities investors to benefit from economies of scale. Schroders UK Alpha Plus’ net asset value now stands at £800m, up from £478.5m at the end of January.
“The start of 2022 has seen the UK equity market outperform global peers as investors turn to sectors such as natural resources and banking, where the UK market has high weightings,” Casey and Kissack said.
“Looking ahead, the fund remains steadfastly focused on investing in high quality, industry leading businesses with strong pricing power. As we charter what is widely predicted to be a high inflation era, this approach will see us deliver performance that protects real returns and dividends for our investors.”
