Schroders  

Schroders merges UK funds amid poor performance

Schroders merges UK funds amid poor performance

Schroders has merged its UK Equity and UK Opportunities funds into a separate fund to ensure "product differentiation" and competitive returns.

Investors in the funds voted last month to merge the two funds into Schroder’s UK Alpha Plus fund, which will have a net asset value of £803mn.

The UK Equity fund saw a 13.8 per cent return, falling behind the 18.3 per cent seen by the FTSE All-Share total return index, and lower than the IA’s UK All Companies sector which saw a 17.1 per cent return.

Meanwhile UK Opportunities fund saw a 13.7 per cent return for the year to the end of December.

Both funds outperformed the fund into which they will be merged, the UK Alpha Plus fund, which saw an 11.6 per cent return for the year.

This fund has underperformed its target, the FTSE All-Share total return index, in four out of the five years since 2017. 

All funds have the same benchmark, and are run by Bill Casey and Nick Kissack.

A spokesperson for Schroders said the company regularly reviews its investment performance to ensure it understands the reasons for outperformance, and whether action is required to improve outcomes for our investors. 

“As such we are currently undertaking a strategic restructuring of our UK equity product range to ensure we deliver product differentiation and competitive returns.”

The company said the UK Alpha Plus fund aims to provide capital growth and income in excess of the FTSE All-Share index, and that the fund has delivered “positive relative performance” under the management of Casey and Kissack.

The amalgamated fund will invest according to similar strategies which focus on UK equities, the spokesperson said, specifically shares of quality long-term businesses that the managers believe are trading at an attractive price.

“The rationale of these mergers are to build on the success of this strategy, as well as benefiting from economies of scale.”

UK equities

UK equities have had a dreadful time over the past few year, with investors pulling out £1.6bn from the asset class in January alone.

During 2021 there were outflows of £4.4bn from UK equity funds, which was this asset class's worst performance since 2018.

Overall, since the UK voted to leave the European Union in 2016 there have been outflows of £21bn from UK equity funds.

The UK All Companies sector has been the worst-selling Investment Association sector for five of the past seven years.

It hasn't been a much better story when it comes to performance. Over the past three years the FTSE All-Share has returned 13.5 per cent while the MSCI World has returned 45.8 per cent.

sally.hickey@ft.com