Schroders PLC · LSE:SDR
Schroders — Investor Presentation (February 2011)
39 slides from Schroders's investor presentation, Feb 9, 2011
Slide 1: Slide 1
Slide 2: Global Emerging Markets business update
Schroders Global Emerging Markets business update 09 February 2011 For professional investors or advisors only
Slide 3: Outlook
Outlook #% Schroders
Slide 4: Emerging balloon a long way from bursting
is is Cr ro Eu Double Dip Inf lat ion E ur oC Ap Cu reci p rre atio D risi Ove ebt nc n rh a s ng y r me g n su agin Co ever l De Double Dip Emerging balloon a long way from bursting Developed balloon struggling to inflate at all Source: Schroders 3
Slide 5: Global economic outlook for 2010/11
Global economic outlook for 2010/11 Base Case Scenario 1 Scenario 2 ‘Two Speed Euro Break-Up ‘V’ Shaped World’ Recovery 70% 15% 15% 2010 2011 2012 2011 2012 2011 2012 Global Growth 3.8% 3.6% 3.5% 2.7% 2.1% 4.8% 5.2% US Growth 2.8% 3.1% 2.7% 2.4% 1.9% 3.9% 4.2% GEMS Growth 6.5% 6.2% 6.0% 5.0% 5.0% 7.
Slide 6: GDP and performance
GDP and performance Difference in real GDP Growth (Emerging vs Developed) and Relative Performance Differential (MSCI EM vs MSCI World)¹ Yoy % 7 300 6 Mar 1989 = 100 270 5 240 4 3 210 2 180 1 150 0 120 -1 90 -2 -3 60 -4 30 Mar 89 Apr 92 May 95 Jun 98 Aug 01 Sep 04 Oct 07 Dec 10 Real GDP growth diffe
Slide 7: Relative performance of GEMS vs World
Relative performance of GEMS vs World MSCI EM Relative to MSCI World1 12.31.00 360 Dec 1988 = 100 to 12.31.102 300 MSCI World 32.0% (2.8%pa) 240 MSCI Europe 44.8% (3.8%pa) MSCI Japan 12.2% (1.1%pa) 180 MSCI US 15.9% (1.5%pa) 120 MSCI EM 350.0% (16.2%pa) 60 0 Dec 88 Feb 92 Apr 95 May 98 Jul 01 Sep 04
Slide 8: GEMs prospective P/E
GEMs prospective P/E Forward Price Earnings 22 Emerging USA World Markets 18 P/E 11.7 13.1 12.5 EPS Growth 16.1 13.8 15.3 14 PE/ EPS 0.7 0.9 0.8 Average Growth Source: Factset, MSCI. 16th December 2010, IBES – 12m forward forecast 10 6 Jun 94 Nov 96 Mar 99 Jul 01 Nov 03 Apr 06 Aug 08 Dec 10 MSCI EM
Slide 9: Valuations
Valuations GEM Aggregate Index/GDP 300 250 +342% +1Std -57% 200 +396% Avg +121% -54% 150 +108.3% -65% 100 -1Std 50 0 Dec 88 Feb 92 Apr 95 May 98 Jul 01 Sep 04 Oct 07 Dec 10 GEM Aggregate Index/GDP Avg +1Std -1Std % moves in the MSCI EM Price Index Emerging markets are still attractive on this measur
Slide 10: Liquidity
Liquidity All Dedicated EM Equity Flows1 Foreign share of local market cap (selected US$ Billions countries)2 120 34% 100 94 83 32% 80 30% 60 54 34 28% 40 33 20 11 16 6 8 26% 0 0 0 0 December 31, 2010 -3 24% GEMs MSCI Weight3 -4 -4 -20 MSCI AC World 13.9% 22% -40 MSCI AC World ex-US 24.1% -49 20% -6
Slide 11: Global emerging markets strategy
Global emerging markets strategy Source: Schroders, February 2011 Information is for illustrative purposes only and is subject to change. Not to be considered a recommendation to buy/sell. 10
Slide 12: What could undermine the GEMS story?
What could undermine the GEMS story? Short/Medium term: – A bubble – Inflation – GEM currencies and the US Dollar – Greek contagion – Double dip – Rising potential risk premium post Tunisia/Egypt Longer term: – Social unrest caused by lack of “trickle down” – Commodity supply inhibiting growth poten
Slide 13: Comparison of current EM performance and previous equity bubbles
Comparison of current EM performance and previous equity bubbles Rebased to 100 1200 1100 1000 900 800 700 600 500 400 300 200 100 0 0 100 200 300 400 Japan 1982-1989 Global TMT 1992-2000 India 2001-2008 China 2003-2007 MSCI EM Now GEMs nowhere near bubble territory Source: Factset, Haver, Citi Inve
Slide 14: GEMs inflation
GEMs inflation Inflation Rate % (y/y) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Jan 2003 Jan 2004 Jan 2005 Jan 2006 Jan 2007 Jan 2008 Jan 2009 Jan 2010 Headline (weighted average) Food CPI Core CPI Headline inflation is beginning to pick up but it is being driven by food Source: UBS, Haver, CEIC Decemb
Slide 15: Cumulative tightening over the past months
Cumulative tightening over the past 12 months Average policy/short term rate compared to 12m ago (pp) 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 Hungary Thailand Turkey Philippines Taiwan Indonesia Chile India Malaysia China Poland Czech Russia Brazil Egypt Peru Mexico Colombia Korea S Africa Some countries are t
Slide 16: Real Central Bank rates
15 -4 -3 -2 -1 0 1 2 3 4 5 6 % Brazil China Ireland Philip. Australia Morocco Malaysia Thailand Indonesia Emerging Mkts Japan NZ Index (+1.1%) Emerging Markets Portugal Chile Hungary Sweden Taiwan Real Central Bank rates Source: Citi Investment Research and Analysis, as at November 2010 Peru India P
Slide 17: The impact of a severe sovereign debt crisis on trend GDP growth estimates
The impact of a severe sovereign debt crisis on trend GDP growth estimates 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% ca e s e s ld a S n t ia s ie ie on p ic pa U or Ea As ri ro om m er Af z W Ja Eu no ro Am e on an dl Eu o n id ec ec ar er tin M h st La ng ed Sa Ea pi nc b- lo va Su e Ad ev D Baselin
Slide 18: Global Emerging Markets Opportunities
Global Emerging Markets Opportunities 17
Slide 19: Schroders investment approach
Schroders investment approach Sources of outperformance Investment Process Alpha from country, stock and bond selection decisions QUANTITATIVE model with proven track record drives country decisions Strong proprietary stock research database/models (GRiD) Incorporates rigorous RISK CONTROLS, includi
Slide 20: Schroders investment approach
Schroders investment approach Aims Return Target return, unconstrained 15.0% p.a. (gross)* over 3 year rolling periods Risk No more than 10% in one issuer, no more than 20% in one country Total value of investments over 5% of fund must not exceed 40% of fund Emerging markets equities 40% - 100%, Glo
Slide 21: Performance of GEM Model vs. MSCI EM
Performance of GEM Model vs. MSCI EM Performance of top down model Annual relative performance (net)1 31 December 1991 = 100 300 700 25% 20.4% 250 600 20% 500 200 15% 400 10.4% 150 10% 8.4% 7.7% 300 5.1% 4.2%4.5%3.5%3.5% 4.5% 4.0% 100 5% 3.3% 2.9% 2.6% 200 1.5% 1.6% 0.5% 0.1% 0.4% 50 100 0% -0.7% 0
Slide 22: Using the model for best ideas
Using the model for best ideas Returns of Model Overweight Countries1 10,000 Top 6 Full Countries Model %p.a. * % p.a.* Total Return 24.5% 14.9% 1,000 Relative Return 13.1% 4.3% 100 Risk 30.7% 25.5% Sharpe Ratio 0.6 0.4 10 Dec 91 Sep 94 Jun 97 Feb 00 Nov 02 Jul 05 Apr 08 Dec 10 Top 6 Model Top 6 cou
Slide 23: Decision process
Decision process Emerging Markets Country Model ― (16.67% per country) Top 6 Countries Equally Weighted Identify 1 & 2 Ranked Stocks in each of the top 6 Countries ― (2% per stock) = Forecast Return X% Add other opportunities if forecast return > X% Other Equities in Top 6 Countries Other Equities i
Slide 24: Portfolio construction
Portfolio construction Model portfolio Top 6 Countries No of Stocks Top 6 Weight Return Adjusted Weights Argentina 1 3.33% 7.44% 2.4% Korea Weight Return Brazil 8 26.67% 26.37% 19.0% Korea 8 26.67% 26.76% 19.0% Hyundai Motors 2.38% 48.65% Hungary 2 6.67% 13.48% 4.8% Samsung Heavy 2.38% 32.05% Russia
Slide 25: Risk controls
Risk controls Risk Controls Equities positions 2% (1% - 3%) Emerging markets equities 40% - 100%, Global bonds 0% - 30%, Cash 0% to 30% Bonds: Sovereign 5% (2% - 10%), Local 5% (2% - 10%), Corporate (1% to 3%) No more than 10% in one issuer, no more than 20% in one country Total value of investments
Slide 26: Differences between emerging markets opportunities fund and global emerging markets fund
Differences between emerging markets opportunities fund and global emerging markets fund Schroder ISF Global Emerging Market Opportunities Schroder ISF Emerging Markets Primarily Emerging Markets Equities, Opportunistic Universe Emerging Markets Equities Emerging Market Bond Exposure Relative Return
Slide 27: Performance of Schroder ISF GEMO vs. Schroder ISF Emerging Markets vs. MSCI EM
Performance of Schroder ISF Global Emerging Market Opportunities vs. Schroder ISF Emerging Markets* vs. MSCI EM since inception* Price Indexed 170 160 19/01/07 – 31/12/10 150 MSCI 140 Schroder Schroder EM US$% ISF 130 ISF EM Index GEMO Net TR 120 Total Return +65.4 +42.1 +40.3 110 100 Annual Return
Slide 28: Performance of Schroder ISF GEMO vs Morningstar Peers since inception
Performance of Schroder ISF Global Emerging Market Opportunities vs Morningstar Peers since inception1 Price Indexed 160 140 Schroder ISF GEMO* TR = + 30.7% 120 AR = + 7.7% p.a. Peers* AV = 24.4% 100 TR = + 6.5% AR = + 1.6% p.a. 80 AV = 30.6% 60 40 Jan-07 Jun-07 Dec-07 May-08 Oct-08 Apr-09 Sep-09 Fe
Slide 29: Schroder ISF Global Emerging Market Opportunities
Schroder ISF Global Emerging Market Opportunities* Investment mandate: Emerging Markets Opportunities Fund Target: +15% p.a. over rolling 3 year periods Inception date: January 19, 2007 Performance to December 31, 2010 (in US$) 1 Year 2 Year Since inception Since inception p.a. p.a. p.a. cumulative
Slide 30: Geometric Attribution – Relative to MSCI Emerging Markets
Schroder ISF Global Emerging Market Opportunities Geometric Attribution – Relative to MSCI Emerging Markets 1/19/07 – In USD 2007* % 2008 % 2009 % 2010 % 12/31/10** % Country +3.3 +4.9 +0.6 +2.0 +2.6 Stock +0.1 +1.4 +3.4 -3.8 +0.2 Developed Bonds 0.0 +0.2 0.0 0.0 +0.1 EM Bonds +0.1 +0.1 -1.3 0.0 -0.
Slide 31: Asset allocation analysis
Schroder ISF Global Emerging Market Opportunities Asset allocation analysis Fund weight Into cash too early Invested into weakness Invested into rally. Recent caution Log scale 40% 5.1 36% 5.0 32% 4.9 28% 4.8 4.7 24% 4.6 20% 4.5 16% 4.4 12% 4.3 8% 4.2 4% 4.1 0% 4.0 Jul-10 Jul-09 Nov-10 Jul-08 Jun-09
Slide 32: Global emerging markets opportunities strategy
Global emerging markets opportunities strategy Source: Schroders, February 2011 Countries shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. 31
Slide 33: Frontiers funds
Frontiers funds #% Schroders
Slide 34: Frontier Markets Strategy
Frontier Markets Strategy Source: Schroders, January 2011 Information is for illustrative purposes only and is subject to change. Not to be considered a recommendation to buy/sell 33
Slide 35: Schroder Global Emerging Markets Equity Composite
Schroder Global Emerging Markets Equity Composite Composite Disclosures as of: December 31, 2009 Definition of the Firm Dispersion The Firm is defined as all accounts managed by Schroder Investment Management in the UK Internal dispersion is calculated using asset weighted standard deviation of all
Slide 36: Schroder Global Emerging Markets Equity Composite
Schroder Global Emerging Markets Equity Composite Composite Performance Results as of: December 31, 2009 Composite: Schroder Global Emerging Markets Equity Composite Benchmark: MSCI EMF Net (MSCI EMF ex Malaysia Gross prior to 06/01/00) Currency: US Dollar Gross Returns as of: December 31,2009 Firm:
Slide 37: Important information
Important information The returns are presented as gross returns, including cash, reinvestment of dividends, interest and other income earned in the period and are calculated on a trade date basis after transaction charges (brokerage commissions), but before taxes and management and custody fees. Pe
Slide 38: Important Information
Important Information The views and opinions contained herein are those of the Emerging Markets team, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. Risk warning: Investments in equities are subject to market risk and, potential
Slide 39: Disclosure statement
Disclosure statement The model performance shown in the presentation must be considered as no more than an approximate representation of the portfolios’ performance, not as indicative of how it would have performed in the past. It is the result of statistical modelling, based on a number of assumpti