Schroders reveals details of £1bn fund overhaul

Schroders’ James Sym has kept just five stocks amid his nearly completed overhaul of the £1bn European Alpha Plus fund he assumed control of from colleague Leon Howard-Spink.

The manager said he was “80 per cent” through the process of realigning the 35-stock portfolio, which he gained control of earlier this month.

Mr Sym, who already ran the £309m European Alpha Income fund, has spent the past few weeks imposing his style on the much larger fund.

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“My starting point was not ‘What is in the portfolio?’ – but what are the best 40 companies I can find to make money,” he said.

“I’m doing away with almost the entire portfolio. The transition process has been in progress and 80 per cent of the portfolio is already changed.”

The manager said there had been just three stocks that he and Mr Howard-Spink had in common but in the transition process he “took a second look” at two other companies and decided to keep those.

Mr Sym said he was looking to add resources to the team now that he would be running more money and two separate funds.

“One of the real challenges will be managing a bigger fund but what has delighted and surprised me most is that clients have left their money in,” he said.

“There is going to be quite a substantial amount of assets to run.”

The manager said early-cycle companies had largely driven his income fund, stating he had “a lot of Spanish and a lot of Italian companies”.

But he said a lot of these types of stocks had now priced in a lot of the recovery. He cited a Spanish TV company that he bought last year, which had seen its price-to-earnings ratio nearly triple from the time of his purchase, meaning the manager registered significant upside in the stock.

“This type of stock has now priced in the vast majority of the recovery,” he said. “A lot of the recovery is priced into early-cycle stocks.”

The manager said as the cycle moved into the expansion phase he would be looking to add more stocks that would benefit in that environment.

He said two stocks he was looking to buy at present were growth stocks, which would do well at this point in the cycle.

“Where we are in the business cycle means we want to expose clients to that growth style because that is what does well,” he said.

He said he had looked at a brick manufacturer in Austria whose share price he expected to “double or triple” because of low earnings expectations from the market.

“I’m not going to get all of them right but I’ve got lots of bets where I can make multiples on initial investments.”

He added: “Clearly we are not at the very bottom of the cycle because we haven’t got market worries and things are improving slowly,” he said.