Schroder Real Return CPI +3.5%
The Schroder Real Return CPI +3.5% Fund is designed to target returns above Australian inflation over rolling 3 year periods. The Fund does not have fixed strategic asset allocation benchmarks but instead adopt a forward looking and flexible approach to achieve their stated objectives.
The Fund stands in contrast to the traditional multi-asset investment approaches which construct investment portfolios around relatively static asset allocations. Such portfolios implicitly assume that the valuation or relative risk and return of different asset classes are stable through time but the reality is they are not.
The Fund ranges across three broad asset groups, being Growth (typically shares and property securities), Diversifying (typically higher yielding debt and some alternatives) and Defensive assets (typically investment grade debt securities and cash), providing the flexibility required to allocate effectively and efficiently to those assets that in combination are most closely aligned with the delivery of the objective.
A multi-faceted risk management framework is incorporated in the decision making process to mitigate inherent downside risks within the Fund. The resulting Fund is diversified across a broad array of risk premia, assets and securities, which leaves each it well placed to achieve its objective in different environments.
To deliver an investment return of 3.5% pa before fees above Australian inflation over rolling 3 year periods. Inflation is defined as the RBA's Trimmed Mean, as published by the Australian Bureau of Statistics.
The Fund also targets a distribution of at least the RBA Cash Rate on a quarterly basis.
|Focussed risk management||
|Unconstrained asset allocation||
|Transparent and liquid||
|Dedicated investment team||
- Market risk: includes the risk of volatility and negative returns arising from investment markets.
- Equities risk: includes the risk that changes in share prices will negatively impact on the value of investments.
- Interest rate/duration risk: The performance of fixed interest and debt securities will be sensitive to movements in domestic and international interest rates (e.g. increases in interest rates result in the capital value of fixed interest investments falling).
- Credit risk: Credit risk arises when an issuing entity defaults, which results in a loss of capital to the Fund.
For a comprehensive list of risks please refer to the PDS.
|Fund Inception date||5 March 2014|
|Valution||Every business day|
Wholesale class - $20,000
|Buy/sell spread^||0.18% on application; 0.26% on redemption|
|Management costs (ICR)||
Wholesale class - 0.60% p.a.
|Distributions||Normally quarterly distribution|
|mFund code||SCH12 (only wholesale class available)|
^Subject to change. Refer to the Buy/Sell spreads page in the Fund Centre
How the Fund is Managed
The Fund employs an objective based asset allocation framework in which both asset class returns and the asset allocation of each portfolio are constantly reviewed. As risk premia (and thereby expected returns) change, so too will the asset allocation of the Fund (and sometimes significantly).
The investment process has four key interlinked steps.
- Objective optimisation
- Strategy refinement
- Portfolio construction
Governance and risk management forms a constant throughout all parts of the investment process.
A summary of the major components of the process are outlined below.
Identifying the right assets to own and when to own them is the most important step in the investment process as it will have the greatest impact on the overall return and risk characteristics of the Fund. Within this step of the process we firstly look to develop the assumptions that underpin the portfolio construction process. This is done by formulating long run expectations for key asset classes and adjusting these to incorporate shorter term mean considerations of value to generate return forecasts that match our investment horizon. Assumptions about risk and correlation are also developed.
In this stage, we utilise our proprietary optimisation model to begin to convert our assumptions into a series of portfolios that account for the covariance between these assets.
While valuation issues/concerns have been addressed during the first stages, we need to then review and incorporate other factors into the process. Other key factors that are important when building objective based portfolios include: understanding the economic cycle, assessing market distortions, and understanding market liquidity. This leads to an indicative portfolio and allows us to identify and incorporate return seeking and risk mitigating strategies.
Using the outcomes of our strategy refinement at the end of this process, we need to identify the portfolio that will help meet our objective. The portfolio is then subject to a broad series of tests, mainly utilising our proprietary systems. These include measurement of statistical risk, factor risk, scenario testing and common sense. These risks are managed via the purchase of insurance, utilising instruments such as options; and ensuring the Fund is sufficiently diversified to cope under periods of market stress.