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Schroders aims to beat inflation with wealth preservation fund
by Matthew Goodburn on Feb 04, 2013 at 09:13
Schroders has launched a low volatility multi-asset fund for its EMD, Currency and Commodity investment team, that will aim to protect investors from creeping inflation.
The US dollar-denominated fund, Schroder ISF Wealth Preservation will be lead managed by Malcolm Melville and will target high net worth individuals and retail investors in the UK and overseas.
The fund, which has been seeded with in-house capital, can invest in equities, bonds, currencies, cash and commodities and is designed to protect investors from the longer term threat of inflation. It will be able to go 100% into cash if market conditions dictate.
Melville will oversee a team of five managers drawn from Schroders' Emerging Market Debt (EMD), Currency and Commodity group which manages a total of $14.4 billion in assets. The fund will screen for holdings based around four distinct pillars of analysis: quantitative, technical, fundamental and sentiment.
The investment process, which involves analysts and managers visting different countries and then deciding whether to invest or remain in cash, is the one used on the firm's €4 billion Schroder ISF EMD Absolute Return fund, headed up by Geoff Blanning which has returned 18.4% over the five years to the end of December.
Melville, who joined Schroders from Caxton Asset Managers in 2010, told Citywire Global that the fund would be an easy to understand, plain vanilla offering with cash its largest initial allocation. It can also hold up to 100% in fixed income and 50% in equities, although currently it had very low exposure to bonds.
He said: 'It is very simple, has no leverage and no complex derivatives. In terms of equities we have launched with our biggest overweight to Japanese equities, which have been out of favour for some time. All our positions are small, and we can only add to them if they are making money. There are also some selective Asian equities and some German and UK positions.'
Melville said the fund, which launched on 30 January, also had some commodities exposure through direct holdings in gold and silver, as well as to listed gold and silver companies. In terms of currencies, it has a small initial exposure to the euro, as well as to the Indian rupee and Thai Bhat.
Melville added: 'The Indian currency has depreciated for the last few years but now there are significant policy changes afoot in the country.'
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After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.