Monthly Fund Update

Issued April 2016
For professional investors or advisers only
Schroder ISF* Global Diversified Growth
A Accumulation share class – 31 March 2016
Schroder ISF Global Diversified Growth targets a return of inflation plus 5% per annum, net of fees, over a full
economic cycle (typically five years). Although this is comparable to a long-term investment in equities, the fund
aims to achieve this with a volatility approximately two thirds that of a global equity portfolio. The fund invests in a
diversified mix of growth asset classes including equities and a range of alternatives.
1 Month
%
3 Months
%
1 Year
%
3 Years
% p.a.
5 years
% p.a.
Fund Return (I Acc share class)
2.4
-1.4
-5.8
4.2
4.6
Fund Return (A Acc share class)
2.2
-1.8
-7.3
2.4
2.9
-
-
0.8
0.8
1.1
5.0
-2.3
-4.9
8.3
7.8
Total returns
as at 31 March 2016
Inflation^
MSCI World 100% hedged to euros
Source: Schroders, Bloomberg, RIMES, in EUR as at 31 March 2016. Performance is shown for the I Acc share class gross of management
fees and A Acc share class, net of costs and management fees. Schroder ISF Global Diversified Growth was launched in July 2012 to
accommodate a transfer of shareholders from the Strategic Solutions funds. Prior to 02 July 2012, the fund uses the track record of Strategic
Solutions – Schroder Global Diversified Growth Fund (launched on 19/05/2006) as a proxy performance track record. Volatility also based on
monthly performance data since 19 May 2006.
Five year annualised volatility is calculated using monthly returns for Schroder ISF Global Diversified Growth I Acc share class gross of
management fees and the MSCI World 100% hedged to euros Index. ^Inflation is measured by Harmonised Index of Consumer Prices (HICP).
HICP performance is the latest available data. Please note we do not provide inflation numbers for less than a year.
Total fund size (€ million): 847.1
Five year annualised volatility: 6.9% (fund) vs. 11.8% (global equities)
Market review
-
It was a broadly positive month for equities as they continued to rebound from mid-February lows, whilst
bond yields rose as risk appetite improved.
-
US equities performed strongly, with the S&P 500 advancing 6.8% as expectations for further increases
in interest rates were deferred. The market responded positively to a dovish statement from the Federal
Open Market Committee followed by a speech from Federal Reserve chair Janet Yellen in which she
reiterated how the central bank needed to ‘proceed cautiously’ in lifting rates. Despite the buoyant jobs
market, leading indicators remained mixed. In bonds, the 10-year Treasury yield rose marginally – from
1.74% to 1.77%.
-
Eurozone equities posted positive returns in March with the MSCI EMU index returning 2.8%. The
European Central Bank (ECB) announced fresh monetary policy easing early in the month. The
measures included expanding asset purchases to €80 billion a month (from €60 billion) and a further cut
to the deposit rate, as well as a new series of four targeted longer-term refinancing operations for banks.
By sector, materials and industrials were the best performers. In bonds, peripheral eurozone sovereigns
continued to fall given the ECB’s recent additions to policy accommodation, but 10-year Bund yields rose
modestly (0.11% to 0.15%).
-
UK equities rose with the FTSE All-Share index recording a gain of 1.9%. The mining and oil and gas
sectors performed well as commodity prices firmed. Industrial sectors led the market higher as investors
shrugged off their defensive mindset, with the change of sentiment reflected in a strong performance
from mid-cap companies. In a negative month for bonds, the 10-year gilt yield rose from 1.34% to 1.42%.
-
After the sharp declines in previous months, the Japanese equity market finally regained some stability
and moved in a narrower range in March. For the month as a whole the Topix benchmark gained 4.8% in
yen terms.
-
The US dollar weakened against all the G10 currencies over the month, notably -4.5% versus the euro.
Dollar weakness also boosted emerging market equities. Brazil registered the most sizeable gain over
the month as rising expectations for political change underpinned a major rally in the local market, and
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*Schroder International Selection Fund is referred to as Schroder ISF throughout this document.
Schroder ISF Global Diversified Growth
For professional investors or advisers only
the real gained 11.8% relative to the US dollar. Recent improvement in commodity prices also proved
supportive. Aside from the Brazilian real, other emerging market currencies also gained strongly,
particularly the Russian rouble (+12.2%).
-
The Bloomberg Commodities Index recorded a strong positive return over the month with US dollar
weakness enhancing returns. Energy was the best performing component in a month which saw the price
of Brent crude rise 10.1% and natural gas gain 14.5%. Agriculture also performed well, while the
industrial metals component posted a slight gain.
Portfolio activity
Over the month the portfolio returned 2.4%, gross of fees. Equities contributed to returns, particularly our global
and US exposure. Our allocation to emerging market debt absolute return was also positive as emerging market
assets rallied on US dollar weakness, while investment grade and high yield debt benefited from strong investor
flows, modest supply and a stable default rate. On the negative side, government bonds detracted as bond yields
rose amid an improvement in risk appetite.
Our total equity exposure remained largely unchanged over the month, however we added further to the portfolio’s
value bias through the addition of the Stable Energy basket. This basket is designed to capture the attractive
valuations in the energy sector after persistently low oil prices and a sustained period of underperformance. It is
focused on stronger companies which are best placed to withstand 12 months of low oil prices, while retaining the
potential to outperform the market should the energy sector recover.
In the currency space, more dovish sentiment from the Fed has led us to reduce our long US dollar position in
favour of the Japanese yen. We also reduced our short Singapore dollar position.
Elsewhere, portfolio positioning was largely unchanged. A few years ago, when valuations were cheaper, we could
give quantitative easing the benefit of doubt and, at the very least, we believed that it would force investors up the
risk curve and offer competitive advantages through its impact on currency. With valuations now more lofty and
concerns that central bank policy is no longer stimulating growth, we continue to run lower equity weights relative
to recent years, with more diversified allocations to investment grade and high yield.
Asset Allocation
Global Equities 18.2%
North America Equities 10.7%
UK Equities 4.8%
Japan Equities 2.8%
Europe ex UK Equities 0.9%
Investment Grade Bonds 9.9%
High Yield Debt 6.7%
Inflation-linked Bonds 3.7%
Government Bonds 3.7%
Convertible Bonds 2.7%
Securitised Loans 1.7%
Absolute Return 15.4%
Commodities 2.7%
Property 2.5%
Insurance-Linked Securities 2.1%
Infrastructure 2.0%
Private Equity 0.6%
Cash 9.0%
Source: Schroders as at 31 March 2016.
2
*Schroder International Selection Fund is referred to as Schroder ISF throughout this document.
Schroder ISF Global Diversified Growth
For professional investors or advisers only
Important Information
This document does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder International Selection Fund (the
“Company”). Nothing in this document should be construed as advice and is therefore not a recommendation to buy or sell shares.
Subscriptions for shares of the Company can only be made on the basis of its latest Key Investor Information Document and prospectus, together with the latest
audited annual report (and subsequent unaudited semi-annual report, if published), copies of which can be obtained, free of charge, from Schroder Investment
Management (Luxembourg) S.A. An investment in the Company entails risks, which are fully described in the prospectus.
Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get the
amount originally invested.
Schroders has expressed its own views and opinions in this document and these may change.
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Risk Considerations
The capital is not guaranteed.A security issuer may not be able to meet its obligations to make timely payments of interest and principal. This will affect the credit
rating of those securities. Investment in bonds and other debt instruments including related derivatives is subject to interest rate risk. The value of the fund may
go down if interest rate rise and vice versa. The fund invests in other funds and its liquidity depends upon the liquidity of those underlying funds. If underlying
funds suspend or defer the payment of redemption proceeds, the fund's ability to meet redemption requests may also be affected.
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*Schroder International Selection Fund is referred to as Schroder ISF throughout this document.

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