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Schroder ISF QEP Global Quality – Freddy van Mulligen’s favourite

Team approach

Van Mulligen likes the fact the Schroders QEP funds are managed by a team, based on a quantitative process, rather than by a possibly capricious star manager. However, he also values the long-time presence of Justin Abercrombie, the head of the Schroders QEP range since it was founded in 1996. Even though Abercrombie splits his time between eight different funds and runs a team of more than 30 people, “he has a decisive voice in all investment decisions and innovations to the strategy,” says Van Mulligen, who is not invested in any of the other QEP strategies.

The importance of fees

Since inception in 2007, even the total return of the A1 accumulation share class of the fund (with a total cost figure of 2.41%, and total assets of $1.34bn!) has is about 15 percentage points higher than that of its official MSCI AC World benchmark, net of fees. However, this outperformance can be attributed entirely to the first four years of the fund. After that, the net performance has been almost identical to the benchmark.

And if benchmarked to the MSCI World Quality, the fund looks a lot less attractive, especially over the past five years. Perhaps this is because its quantitative investment process has forced the fund to be underweight expensive companies such as Johnson & Johnson, Microsoft and Alphabet, which have outperformed the wider market over the past couple of years by quite a margin. Even though the fund has about 400 holdings, it is indeed far from a benchmark hugger, as it has an active share of 73% (as of the end of August 2016).

The lower performance of the strategy after costs over the past few years shows it’s vital to pay attention to which share class you’re buying. Or perhaps you should try to strike your own deal with Schroders like Van Mulligen has done. He is paying a lot less than if he had invested even in the cheapest institutional share class of the fund. “As a large institutional investor, we always invest through mandates, and get considerable discounts from asset managers,” he explains. 

Part of the Mark Allen Group.