Schroders has launched an emerging multi-asset income fund which aims to provide income and capital growth over the medium- to long-term.
The Schroder ISF Emerging Multi-Asset Income fund will invest two-thirds in equities, bonds and alternative assets of global emerging markets.
The fund will also invest in cash and up to 10 per cent of its net assets into open-ended investment funds. The US dollar-denominated fund is domiciled in Luxembourg and has a management fee of 1.25 per cent. Its minimum subscription is €1,000 (£728).
The fund aims to return between 5 and 6 per cent pa. It is managed by Aymeric Forest and Iain Cunningham, part of the group’s multi-asset team and who manage the £4.3bn Schroder ISF Global Multi-Asset Income fund.
The fund is heavily overweight emerging markets, but it can also invest up to 30 per cent in developed markets that have a particular access to the emerging world from a trade point of view, for instance, Australia, Germany or Korea.
Comment:
While emerging markets are considered risky and volatile due to fluctuating market conditions, with the right strategy they can fetch high returns.
This new launch looks set to diversify its investments across sectors and regions of emerging markets. The fund can invest up to 70 per cent of its assets in emerging market countries and the remaining 30 per cent in developed markets that have access to the emerging world through trade.
The current portfolio’s asset exposure is in Australian and Korean bonds on the fixed income side, which can help the fund diversify and manage risk.
The managers recognise that emerging markets can be challenging for investors since they have underperformed developed markets since 2011. Keeping this in mind, the fund can invest in up to seven different asset classes.
However, the fund faces a number of risks as well. These include macroeconomic risks such as a change in monetary policy from central banks, the slowdown of the Chinese economy and so on.
Last year, countries in the emerging world suffered a blow when the US Federal Reserve decided to start wrapping up its bond buying programme. With the markets speculating a rate hike from the Fed soon, investors must remember that emerging markets could still be at risk.
Fund facts:
– The group’s first emerging markets multi-asset fund
– 1.25 per cent management fee
– Aims an annual return of 5 to 6 per cent
– Access to seven different asset classes
– Can invest up to 30 per cent in developed countries
