Download Everything old is new again

17 July 2009
www.schroders.com.au
Press Release
Everything old is new again - the balanced fund revival
The Schroders Superannuation Fund completed the most recent financial year near the top of the
charts with a -5.6% return for the year to June 2009, after fees and tax. This compares with the
average superannuation fund which is estimated to post a loss of -13% for the same time period
according to SuperRatings. Over the 3 years to 30 June 2009 the Schroders Superannuation Fund
recorded a performance of 0.3% p.a., one of only a handful of Australian funds to post a positive
return over this time horizon. The Schroder Balanced Fund (which adopts exactly the same strategy
but is a pre-tax vehicle) recorded a return of -5.5% after fees for the year to 30 June 2009.
Defying any ‘one hit wonder’ comments, the Schroder Balanced Fund’s performance over 1, 3 and 5
years has been top decile every month of the last year according to Morningstar’s Multi Sector
Growth category rankings which consider the performance of over 60 funds.
Balanced portfolios have become increasingly complex over the last decade however the rankings
show it is the simple, ‘old school’ balanced funds that have delivered the better returns.
“Over the last decade we have seen the splitting up of balanced mandates into specialists, an
increasing desire to appoint boutiques and many funds diving into complex securities, hedge funds,
private equity and infrastructure. The results show that this has not added the value expected by
many, especially after fees. The success of long term balanced investing lies not in the complexity
of the ingredients but rather the understanding of the long-term risk/return trade off of different asset
classes and the willingness and ability to move assets to take advantage of that” said Simon Doyle,
Head of Fixed Income and Multi-Asset at Schroder Investment Management Australia Limited and
portfolio manager of the Schroders Superannuation Fund and Schroder Balanced Fund.
"Risk assets became increasingly expensive through late 2006 and 2007 causing a substantial
deterioration in the risk return trade-off for these assets. Our performance benefited by simply
shifting risk away from these markets, selling out of listed property trusts and substantially reducing
our exposure to credit and equities in favour of cash and sovereign bonds. The result was a
Schroder Investment Management Australia Limited
ABN 22 000 443 274
Level 20, Angel Place, 123 Pitt Street, Sydney, NSW 2000
preservation of investor capital, maintained liquidity and positioning the Fund for future investment
opportunities where the risk/reward trade-off is favourable."
The balanced fund approach practiced by Schroders is comparable to the style popular in the mid1990s where one or a small number of investment managers were used to manage across a range
of asset classes. This enabled managers to take a view on not only the stocks within an asset class,
for example Australian equities, but also the relative attractiveness of Australian equities to other
assets. The unbundling of this approach to investing occurred in the mid-1990s resulting in multimanager structures with different asset managers for each asset class and limited ability to apply
decisions across asset classes. In many cases, specific asset classes were managed by boutiques,
small firms with a speciality in only one asset class and limited research or analytical capability. The
consequences have been a dramatic increase in the complexity of most balanced funds and a
restriction in their ability to make substantial shifts in their asset allocation from one asset class to
another.
“I think we are starting to see a return to the "simpler" days of portfolio construction, and dare I say
it, single manager balanced funds. After a lengthy period of rising markets and easy investing, asset
allocation has regained its dominance in driving the total return outcome of a portfolio. It’s not a new
phenomenon, and was in fact the case for much of the 1960's and 1970's.” says Simon Doyle.
Schroders’ view is that the importance of asset allocation is here to stay. While various industry
participants spend their time debating the relative merits of unlisted vs listed investments, passive vs
active and different fee structures, the importance of being able to make changes in the asset
allocation of a fund in response to a changing investment outlook is, in Schroders’ view, an order of
magnitude more important.
The Schroders Superannuation Fund has been in operation for almost 40 years and is one of the
longest running single manager balanced funds in Australia. Since the introduction of compulsory
superannuation (taken as 1 July 1992) the Schroders Superannuation Fund has returned 8.1% p.a.
which is equivalent to CPI+5.5% and more than 0.5% ahead of its performance objective. This
compares with the average superannuation fund which, according to SuperRatings has delivered
only CPI+4.1% (or 6.7% p.a. vs CPI of 2.6% p.a).
Contact:
Linda Farrell
Ph: (02) 9210 9214
Mob: 0418 657 256
Email: [email protected]
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Additional information on Schroder Investment Management Australia Limited:
Schroders plc is one of the world's leading asset management companies and a specialist wholesale manager offering an extensive
range of domestic and international, specialist and diversified investment products to institutions, superannuation funds and master
trust providers. As one of the largest truly independent fund managers in the world, with over $A213 billion under management (as at
31 March 2009), we aim to apply our expertise in research and investment to serving the needs of our clients in over 26 countries
worldwide. While many financial institutions try to provide all things to their clients, Schroders specialise in just one - pure investment
management.
Schroder Investment Management Australia Limited, ABN 22 000 443 274, AFSL 226473 (SIMAL) is a wholly owned subsidiary of
Schroders plc, a publicly listed UK company descending from a group that can trace its origins in banking and finance back over 200
years. SIMAL was established in 1961 and is home to the domestic research and investment teams that form an integral part of
Schroders' global network. SIMAL offers the full range of Schroders international products to wholesale investors, including Australian
and international equities and fixed interest. SIMAL currently manages over A$10.8bn on behalf of Australians (as at 30 June 2009).
Investment in the Schroder Balanced Fund or the Schroders Superannuation Fund may be made on an application form in
the most current Product Disclosure Statement available from Schroder Investment Management Australia Limited (ABN
2
22 000 443 274, AFSL 226473) (“Schroders”).This document should not be relied on by any person for the purposes of
making investment decisions. Total returns are calculated using exit price to exit price, after fees and expenses, and
assuming reinvestment of income. Gross returns are calculated using exit price to exit price and are gross of fees and
expenses. The repayment of capital and performance of the Fund is not guaranteed by Schroders or any company in the
Schroders Group. Past performance is not a reliable indicator of future performance. Opinions constitute our judgement
at the time of issue and are subject to change. This document does not contain and is not to be taken as containing any
financial product advice or financial product recommendation.
All Correspondence To: GPO Box 5059, Sydney, NSW 2001
Telephone (02) 9210 9200 Fax (02) 9231 1137 Ausdoc DX 956
For your security telephone conversations may be taped.
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