Notification of changes to the underlying funds of various Schroder funds
07 January 2020
L37 Schroder Global Multi-Asset Income (GBP HDG) (the “Mirror Fund 1”)
L41 Schroder Global Multi-Asset Income (USD) (the “Mirror Fund 2”)
P82 Schroder Global Cities Real Estate (USD) (the “Mirror Fund 3”)
P83 Schroder Global Cities Real Estate (EUR) (the “Mirror Fund 4”)
R34 Schroder Global Climate Change Equity (the “Mirror Fund 5”)
(together the “Mirror Funds 1-5”)
We have been notified by Schroder Investment Management (Europe) S.A. (“The Company”) of the upcoming various policy changes to the underlying funds of the Mirror Funds 1-5. These changes will take effect from 19 February 2020 (the “Effective Date 1”), unless otherwise stated.
From the Effective Date 1, the investment policy of the underlying funds of the Mirror Funds 1-2 will be amended to increase the amount that they can invest in Asset Backed Securities (ABS) and Mortgage Backed Securities (MBS) to up to 20% of their assets. The Company believes this change can improve the overall risk and return characteristics of the underlying funds of the Mirror Funds 1-2 by offering protection against rising interest rates and diversifying the holdings from traditional credit. All other key features of the underlying funds of the Mirror Funds 1-2 and their risk profiles will remain the same. There will be no change in the investment style or the investment philosophy of the underlying funds of the Mirror Funds 1-2 following this change.
The investment policies of the underlying funds of the Mirror Funds 3-5 currently include the ability to invest in derivatives with the aim of achieving investment gains. The underlying funds of the Mirror Funds 3-5 do not require this ability, so the Company has decided to remove the wording from the Effective Date 1. This means that from the Effective Date 1, the underlying funds of the Mirror Funds 3-5 will not be permitted to invest in derivatives with the aim of achieving investment gains. The underlying funds of the Mirror Funds 3-5 will retain the ability to invest in derivatives for the purpose of reducing risk or managing the underlying funds of the Mirror Funds 3-5 more efficiently. All other key features of the underlying funds of the Mirror Funds 3-5 will remain the same. There will be no change in the investment style or investment philosophy of the underlying funds of the Mirror Funds 3-5 following this change.
With effect from 30 December 2019 (the “Effective Date 2”), the investment policy of the underlying fund of Mirror Fund 5 has been enhanced to provide that the underlying fund of Mirror Fund 5 invests at least two-thirds of its assets in equity and equity related securities of companies worldwide which the investment manager believes will benefit from efforts to accommodate or limit the impact of global climate change and to include the following disclosure:
“Climate Change Strategy
The strategy looks for opportunities across a global and diverse opportunity set, providing a well-diversified portfolio of different companies across sectors linked to climate change. The strategy invests across five key climate change themes: energy efficiency, environmental resources, sustainable transport, clean energy and low-carbon leader.
The investment manager’s first task in the process of stock selection is to determine a universe of companies from the global investment universe whose long-term business outlook, in its opinion, is impacted by efforts to mitigate or adapt to climate change. The investment manager has built a team process and supporting systems that draw on a range of inputs to identify companies where climate change is a significant positive to the business outlook.
Given rapidly changing business impacts, it is not possible to have simple percentage rules for the amount that a company is positively or negatively impacted by climate change. The overarching principle is that climate change must have a significant impact on the long-term business outlook for a stock to be included. When assessing the significance of climate change on the long-term business-outlook for a company, the investment manager considers the relevant impact on expected revenue growth, operating margin and capital intensity of the company. The strategy excludes companies that generate significant revenues from fossil fuel (e.g. oil, coal, gas, tar-sands, shale-gas), tobacco and weapons from the investable universe.”
Should you have any questions regarding these changes, please contact International Funds & Investments.