Wealth & Finance International - Fund Awards 2016

www.wealthandfinance-intl.com 9 Best Italian Equity Fund: Schroder ISF Italian Equity Schroder ISF Italian Equity provides clients with unrivalled access to Italian companies, a flexible management style and a bottom-up investment approach. We asked the fund’s portfolio managers, Nicholette MacDonald-Brown and Hannah Piper, to tell us more. Company: Schroders Web Address: www.schroders.com Address: 31 Gresham Street, London, EC2V 7QA Schroder ISF Italian Equity adopts a blended investment approach with the flexibility to invest in growth and value stocks, which widens the opportunity set and helps the fund to deliver superior returns. “Strategies that focus on one style of investing may experience pro- longed periods of underperformance when that particular style is out of favour, so a blended approach is important in trying to generate outper- formance across different market environments”, says Nicholette. The fund also invests in companies of all sizes, allowing investors to access the most attractive opportunities across Italian equities. Hannah goes on to highlight how the fund focuses on diversification and risk management, which is vital to ensuring strong returns for clients. “Risk management is an integral part of our investment process. We look to expose the portfolio to a range of companies, ensuring that the portfolio is not overly exposed to any one theme, sector or market style. The market rewards different types of styles at different times – we want to diversify to the point that, whatever is happening in the market, the portfolio will produce positive returns over the longer term. “Importantly, the portfolio managers are also supported by 12 skilled bottom-up sector analysts. We feel this provides the portfolio with an extra layer of security and that our team-driven process enhances the decision-making of analysts while resulting in a high conviction portfolio of approximately 40 stocks. “This is particularly vital in the current market as we anticipate that the high levels of volatility seen lately are likely to continue. Stress test results for Italian banks are due shortly and a referendum on constitu- tional reform – an all-important issue for Prime Minister Matteo Renzi – is expected to take place in October/November. Both of these events will be very closely watched. We note that the Italian stock market has underperformed the rest of Europe and that this has already given rise to some valuation anomalies and therefore opportunities for investors such as ourselves. We continue to maintain our focus on stock-specific risk.” To conclude, Nicholette talks us through what they believe is the key driver of long-term returns. “A key facet of our investment process is how we do not solely focus on valuation when making an investment decision. We’re also searching for an inflection point or a ‘catalyst for change’. An inflection point is a credible potential catalyst that can lead to a positive long-term outlook for a company. These include an improving demand outlook, manage- ment change, cost restructuring, capital allocation, dividend policy, merger and acquisition activity or disposals. The combination of these two elements – valuation and the inflection point – then informs the strength of our conviction call. “To be able to outperform on a consistent basis as well as producing su- perior returns over the long term, we must be able to challenge existing names and let go of lower conviction holdings. We regularly reappraise our holdings to make sure our investment thesis remains valid. This avoids what we refer to as ‘thesis drift’ and ensures that the portfolio is made up of our highest conviction ideas.” LA16013