The Schroder All China Equity Opportunities Fund is actively managed and has the flexibility to allocate to a variety of China equities, regardless of where they are listed – including China A-Shares, Chinese and Hong Kong listed companies and US-listed ADRs.

Graeme Mather, head of distribution, said that the gradual opening up of China’s capital markets provides investors with an opportunity that can’t be ignored.

“As the second largest stock market in the world and the biggest contributor to global economic growth, the size and ambition of China presents an attractive opportunity for investors.

“It is also a market where over 80% of assets are owned by retail investors creating an opportunity for more experienced institutional investors to add alpha and this has been the case in recent years with active managers generating strong returns above benchmarks.

“China is now leading other countries in terms of its economic recovery, and industrial activity has improved following the pandemic while domestic consumption is almost back to pre-pandemic levels.

“The share of Chinese equities in global benchmark indices is still relatively low when compared with China’s share of global GDP and in our view, it could be beneficial for investors to increase their exposure to this region as opposed to waiting for index providers to increase their weighting over time.”

Mr Mather said Schroders is well placed to focus on China equities due to a strong understanding of the region, having opened its first representative office in Shanghai in 1994.

“Schroders has an established investment business on the ground in China with 22 analysts and portfolio managers already managing US$13bn AUM in China equities.”

The Schroder All China Equity Opportunities Fund seeks to invest in the best Chinese companies by following a disciplined and repeatable investment process, leveraging proprietary long-term, fundamental, bottom-up research to identify investment opportunities from a broad universe of all Chinese companies without being constrained by their geographic listing locations.

The fund’s investment return objective is to outperform the MSCI China All Shares Index (after fees) over the medium to long term.

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The Fund gives Australian investors easier access to a professionally managed portfolio of private equity investments, an asset class that has traditionally been reserved for only the largest and most sophisticated investors.

Schroders Australia alternatives director, Claire Smith, said that the Fund provides investors with diversification away from listed equity markets, and has a particular focus on small-to-mid cap specialist opportunities in the US and Europe, as well as Asian growth companies.

“By their nature, these companies are at earlier stages in their life cycle and are generally not accessible via listed markets given the high costs associated with public listings. As such this is an area where there is a particularly compelling risk/return trade-off for investors.

“Private equity opens up investment opportunities in a broader universe of companies than those listed on public stock exchanges – providing access to companies that are diverse in stage and size – and are otherwise difficult to access.”

Schroders head of distribution, Graeme Mather, said in the current climate of lower interest rates and elevated equity market valuations, some investors are looking for new ways to generate returns and are seeking diversification away from traditional listed equity and fixed income markets.

“Private equity is one solution for these investors.

“The Fund aims to generate an absolute internal rate of return of 10% to 12%, net of fees, over periods of five years and longer, which can be attractive for an investor with a long-term investment horizon.

“While private equity funds are typically illiquid, with investors generally only able to realise their investment at the end of a fund’s life, our unique structuring solution allows investors a degree of liquidity as they can apply to redeem on a quarterly basis. This liquidity has its limitations, including a cap on net redemptions each quarter, but has still proved popular with advisers and their clients,” he said.

The Fund has a “Recommended” rating from Zenith and an “Investment Grade” rating from Lonsec.

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Retirees underestimating cost of living in retirement.

Key insights include:

• Australians expect to spend an average of 39% of their retirement income on basic living expenses — but the reality is retirees require 58%.
• Working Australians feel they should be saving 15% of their current income for a comfortable retirement, but they only save an average of 12%.
• Australian retirees currently live off 52% of their final salary as an income. This compares to 71% of final salary which working Australians feel they will need in retirement.
• The Schroders Global Investor Study 2018 — which surveyed more than 22,000 investors from 30 countries — has revealed a significant gap between expectations and the financial realities of a life in retirement.

The survey, which was compiled in March and April this year, included detailed responses from more than 1,200 Australians. The key insights are below.

Retiree living expenses

People in Australia expect to spend an average of 39% of their retirement income on basic living expenses, but according to the retired Australians who completed the survey, the reality is that they require 58% of their income to be used on living expenses — not including travel or healthcare. This is the fourth largest gap between expectation and reality in the world, behind South Africa, Sweden and the US.

Retirement income

Australians closer to retirement who are aged 55 and over may also be in for a shock by expecting too much retirement income. They predicted that they will need an average of 71% of their current salary or income to live comfortably in retirement. The reality is that Australian retirees are, on average, receiving only 52% of their final working salary annually.

Retirement adequacy

The data also shows that in Australia, 61% of retirees state they do not have enough, or could do with more income to live comfortably.

Retirement savings gap

While the superannuation system helps Australians reach a level where respondents said they saved an average of 12% for their retirement, they also said they believed they should be saving 15% of their income. This is a significant savings gap between what people feel they should save for retirement and what they actually save.

Lesley-Ann Morgan, Global Head of Retirement, Schroders, commented: “There is a real danger that people globally are underestimating the proportion of their retirement income that will need to be allocated to basic living expenses and the amount of money they will need to live comfortably in retirement, particularly in the current environment of low returns and increasing inflation.

“There is no magic wand for people. To avoid facing challenging financial circumstances on retirement, they need to recognise the need to start saving as much and as early as possible.

“Perhaps as a result of not having enough in retirement, our study showed that retirees were continuing to invest, and this often represented a larger amount than they expected prior to retirement.”

Graeme Mather, Head of Distribution for Schroders Australia, said: “It’s reassuring to see that Australians are saving on average 12% of their income for retirement, largely as a result of our compulsory retirement saving system, but there is still a savings gap to overcome to ensure people are better prepared for retirement.

“There are clearly a number of lessons we can learn from our elders where the experience of a retiree differs from what working Australians expect in retirement. Saving as much as possible from as early on as possible can help alleviate this gap between expectation and reality.

“Retirees continue to be active investors in retirement and it is important that the retirement investment solutions available to them can help them meet their expectations and importantly avoid surprises.

“People are living longer so it is encouraging to see investors continue to invest actively into retirement to ensure that their savings last.”

See the full Schroders Global Investor Study 2018 ‘Saving for a comfortable retirement’ report.

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Andrew Fleming

Schroders is excited to announce that Netwealth has added the Schroder Equity Opportunities Fund to its super and investment solution.

The Schroder Equity Opportunities Fund is now available via Macquarie Wrap, HUB 24, mFunds and Netwealth. Lonsec has given Schroder Equity Opportunities Fund an initial rating of Recommended.

Graeme Mather, Head of Distribution says “We are pleased that Schroders have been able to accommodate the strong demand from the market through further platform inclusion.”

Lonsec reports: “Given the nuances of the local market, Lonsec believes the Fund’s ‘all-cap’, benchmark unaware approach can offer improved economic diversification relative to a traditional benchmark aware approach. Furthermore, Lonsec has high regard for the investment team led by Martin Conlon and Andrew Fleming as well as Schroder’s ‘bottom-up’ investment process”^[1]

Schroder Equity Opportunities Fund invests beyond the benchmark for greater breadth, taking insights from Schroders’ Australian Equities team to invest across the full market cap spectrum. At September 2017, the fund has delivered returns of 13% (net of fees) over the preceding 12 months.

Longer term, the Fund has outperformed the S&P/ASX300 index by 3.4% p.a. (net of fees) since its inception almost 10 years ago.

The Schroder Equity Opportunities Fund allows unconstrained investing and avoids the pitfalls of cap-weighted benchmarks without the stock concentration normally associated with ‘high conviction’ portfolios. The team also manages the Schroder Australian Equity Fund, which has held Morningstar’s highest analyst rating for 10 consecutive years, retaining the ‘Gold’ Morningstar Analyst RatingTM^[2] in September 2017. Schroders was also awarded 2017 Fund Manager of the Year in Domestic Equities – Large Caps Category, Australia. Morningstar Awards 2017 (c). Morningstar, Inc. All Rights Reserved.

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[1] The Lonsec Rating (assigned as follows: Schroder Equity Opportunities Fund – 28 September 2017) presented in this document are published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421445. The Ratings are limited to “General Advice” (as defined in the Corporations Act 2001 (Cth)) and based solely on consideration of the investment merits of the financial products. Past performance information is for illustrative purposes only and is not indicative of future performance. They are not a recommendation to purchase, sell or hold Schroder Investment Management Australia Limited products, and you should seek independent financial advice before investing in these products. The Ratings are subject to change without notice and Lonsec assumes no obligation to update the relevant documents following publication. Lonsec receives a fee from the Fund Manager for researching the products using comprehensive and objective criteria. For further information regarding Lonsec’s Ratings methodology, please refer to our website at:http://www.lonsecresearch.com.au/research-solutions/our-ratings This rating is not to be circulated or distributed and is solely for the information of financial services professionals, such as a financial adviser.

[2] © 2017 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice or ‘class service’ have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf . You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 (“ASXO”). The Morningstar Analyst Rating for Schroder Australian Equity Fund strategy is ‘Gold’ as at 21 September 2017.

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