Schroders PLC · LSE:SDR
Schroders — Investor Presentation (August 2007)
36 slides from Schroders's investor presentation, August 2007
Slide 1: Investing in Equities with a Low Volatility Strategy
Investing in Equities with a Low Volatility Strategy CPPI vs Option Strategies Dr Thomas See Co-Head of Structured Investments August 2007 For Professional Investors Only
Slide 2: Constant Proportion Portfolio Insurance – CPPI
1 Constant Proportion Portfolio Insurance – “CPPI” CPPI facilitates investment with capital protection 100% 80% 0% 0 years 5 years Source: Schroders July 2007 30651
Slide 3: Constant Proportion Portfolio Insurance – CPPI
2 Constant Proportion Portfolio Insurance – “CPPI” But delivering protection alone is unsatisfactory for investors 100% X 80% 20% 40% 10% X Risk capital Risk capital 0% 0 years 5 years Source: Schroders July 2007
Slide 4: Close Ended Options Strategy
3 Close Ended Options Strategy P % of growth 100% Steeper 80% 0% 0 years 5 years Source: Schroders July 2007 30651
Slide 5: Open Ended Options Strategy
4 Open Ended Options Strategy 100% 80% 0% Q1 Q2 Q3 Q4 Source: Schroders July 2007 30651
Slide 6: Maximum Downside Loss
5 Maximum Downside Loss How Likely Is This? 100% 80% Probability? 50%? 25%? 12.5%? 6.25%? 0% Q1 Q2 Q3 Q4 Source: Schroders July 2007 30651
Slide 7: Investing in Equities with a Low Volatility Strategy
6 Investing in Equities with a Low Volatility Strategy Schroder ISF European Defensive *Schroder International Selection Fund is referred to as Schroder ISF throughout this presentation For Professional Investors Only
Slide 8: Why Defensive Equity?
7 Why Defensive Equity? Level (rebased to 100) Quarterly capital return on MSCI Europe 1,200 25% 20% 1,000 15% 10% 800 5% 600 0% MSCI Europe Local -5% 400 Currency Net Return -10% -15% 200 3 month rolling ECU deposit -20% 0 -25% 84 89 93 97 01 05 06 87 89 90 92 93 95 96 98 99 01 02 04 05 07 Historic
Slide 9: Schroder ISF European Defensive
8 Schroder ISF European Defensive Objectives Participate in rising equity markets Protect from sharp falls in the equity markets Long-term returns that lie between cash and equities 30651
Slide 10: Structure
9 Structure Gain NAV 100% 95% 94% 0% 0% Start End Source: Schroders July 2007 30651
Slide 11: Active Determination of Option Strategy
10 Active Determination of Option Strategy 115% Fund Value 110% 105% 100% 95% 90% Equity Market Performance 85% 85% 90% 95% 100% 105% 110% 115% 30651
Slide 12: Structure compares well with CPPI
11 Schroder ISF European Defensive Structure compares well with CPPI, without some of its disadvantages 120% 110% 100% 90% 80% 70% 60% 50% 40% Mar 2001 Mar 2002 Mar 2003 Mar 2004 Mar 2005 Mar 2006 Schroder ISF European Defensive CPPI MSCI Europe Bond Floor Source: Schroders June 2006 30651
Slide 13: Low volatility
12 Schroder ISF European Defensive Low volatility 35% 30% 25% 20% 15% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007 Schroder ISF European Defensive Underlying Equity Basket Source: Schroders July 2007 30651
Slide 14: Low Volatility
13 Low Volatility Asset Annual volatility Total/Vodafone 20%–30% Euro STOXX 50 14.6% Schroder ISF European Defensive underlying Equity Basket 13.8% Schroder ISF European Defensive 9.4% Bunds (5 years) 2.7% Source: Schroders July 2007 Source: Schroders July 2007 30651
Slide 15: Consistent participation
14 Schroder ISF European Defensive Consistent participation When market level changes When volatility level changes 120% 120% 35% 100% 100% 30% 25% 80% 80% 20% 60% 60% 15% 40% 40% 10% 20% 20% 5% 0% 0% 0% Jul 00 Nov 01 Jul 04 Jul 04 Nov 05 Jun 00 Mar 03 Dec 05 Apr 07 Oct 01 Mar 03 Apr 07 Participatio
Slide 16: Demonstrable added value in active management
15 Schroder ISF European Defensive Demonstrable added value in active management 120% 100% 80% 60% 40% 2000 2001 2003 2004 2006 2007 Schroder ISF European Defensive Non-active Strategy Source: Schroders July 2007 30651
Slide 17: Actual Historical Performance to Date
16 Actual Historical Performance to Date Fund performance for past 1 year 1.30 1.25 1.20 1.15 1.10 1.05 1.00 0.95 0.90 Jul 06 Oct 06 Dec 06 Feb 07 May 07 Jul 07 Euro STOXX 50 Cash Schroder ISF European Defensive Source: Schroders July 2007 30651
Slide 18: Actual Historical Performance to Date
17 Actual Historical Performance to Date Fund performance for past 3 years 1.9 1.7 1.5 1.3 1.1 0.9 Jul 04 Dec 04 Apr 05 Sep 05 Jan 06 Jun 06 Oct 06 Mar 07 Jul 07 Euro STOXX 50 Cash Schroder ISF European Defensive Source: Schroders July 2007 30651
Slide 19: Fund Performance on Calendar Year Basis
18 Fund Performance on Calendar Year Basis 2007 YTD to 2001 2002 2003 2004 2005 2006 31/7/07 Schroder ISF -11.29% -6.01% 8.60% 3.32% 12.54% 6.15% 4.36% European Defensive Euro STOXX 50 -20.25% -37.30% 15.68% 6.90% 21.27% 10.07% 4.75% Source: Schroders July 2007 30651
Slide 20: The Investment Case
19 The Investment Case An alternative to equity… An alternative to cash… Investor requires exposure to equities but wants some Investor is risk averse and conservative but wants more protection.... potential upside.... Over the medium term, returns are expected to be between euro cash and European e
Slide 21: Summary of Benefits
20 Summary of Benefits Consistent participation in European equity market rises Provide long term returns lying between equities and cash Managed with the objective of limiting falls in the share price to 5% on a rolling quarterly basis Regular lock-in of gains as floor price ratchets up in rising m
Slide 22: New Funds Launch – Defensive Range of Funds
21 New Funds Launch – Defensive Range of Funds *Schroder ISF European Defensive *Schroder ISF World Defensive 3 Monthly *Schroder ISF European Defensive 6 Monthly *Schroder ISF European Defensive Monthly *Schroder International Selection Fund is referred to as Schroder ISF throughout this presentati
Slide 23: Three New Defensive Funds
22 Three New Defensive Funds World Defensive 3 Monthly – Repeats structure of European Defensive – But with a broader global equity market exposure, actively managed by Schroders European Defensive 6 Monthly – Gives investor/distributor a choice over protection level – Fund resets 95% protection lev
Slide 24: World Defensive
23 World Defensive Added value from world equity markets World Defensive 3 Monthly 300% 300% 250% 250% 200% 200% 150% 150% 100% 100% 50% 50% 0% 0% 1997 1999 2001 2003 2005 1997 1999 2001 2002 2004 2006 Germany Italy Europe US UK France Japan Hong Kong Spain Netherlands The world equity markets are l
Slide 25: High Indicative Participation Rates
24 High Indicative Participation Rates Fund Structure Indicative Underlying Equity Market (Periodic Floor Level) Participation Rate* European Defensive 3 Monthly @ 95% ~76% Basket European Indices World Defensive 3 Monthly @ 95% ~80% Basket World Indices European Defensive 6 Monthly @ 95% ~70% Baske
Slide 26: Managing Maximum Loss
25 Managing Maximum Loss Fund Structure 99% confidence 90% confidence 1 Monthly @ 98,5% > 89% > 93% 6 Monthly @ 95% > 91%* > 91%* 3 Monthly @ 95% > 82% > 87% Underlying > 63% >75 % *Loss level is at maximum loss floor Table shows confidence levels fund value will be above certain levels, relative to
Slide 27: Schroder Defensive Range
26 Schroder Defensive Range More conservative returns distribution 18% – Defensive range members have incrementally less risky returns 16% distributions. 14% less risky 12% 10% 8% 6% 4% 2% 0% 40% 60% 80% 100% 120% 140% 160% 180% 200% 220% 5 years 1M 5 years 3M 5 years 6M 5 years SX5E Source: Schrode
Slide 28: Schroder Defensive Range
27 Schroder Defensive Range Funds will share the same signature characteristics of European Defensive – Low volatility – Consistent participation – Active management 30651
Slide 29: Summary
28 Summary Schroder Defensive Range gives choice of protection levels and underlying equity market European World European European Investor View 3 Monthly 3 Monthly 6 Monthly 1 Monthly 9 9 9 9 Choice equity markets European Equities World Equities European Equities European Equities 9 9 Higher Part
Slide 30: Comparison with Invesco Capital Shield 90 (EUR) Fund
29 Comparison of Schroder Defensive Range with Invesco Capital Shield 90 (EUR) Fund *Schroder International Selection Fund is referred to as Schroder ISF throughout this presentation For Professional Investors Only
Slide 31: Comparison of Fund Price Performance
30 Comparison of Fund Price Performance Defensive Range funds have greater market exposure 155% – Chart shows actual fund prices since launch of Invesco Capital 145% Shield 90 135% – Prices for Schroder ISF 125% Defensive Monthly and 6 Monthly have been simulated 115% using historical market data 10
Slide 32: Composite Portfolio with Similar Performance
31 Composite Portfolio with Similar Performance 50% Cash + 50% Schroder ISF European Defensive Monthly 125% – To produce a “like for like” comparison, a composite portfolio comprising 50% Cash + 50% Schroder ISF Defensive 115% Monthly is considered – Portfolio performance is similar 105% to Invesco
Slide 33: Fund Price Volatility
32 Fund Price Volatility Composite Portfolio has lower volatility than Invesco Capital Shield 90 10% – Using annualised volatility as a general measure of risk, we see 8% that the Composite Portfolio was less risky than Invesco Capital Shield 90, but delivered 6% very similar performance 4% – Schrod
Slide 34: Simulating a CPPI 90 Strategy
33 Simulating a “CPPI 90” Strategy CPPI 90 = protection of 90% of the “High Water Mark” 200% – We simulate a CPPI 90 strategy 180% 160% – Performance of CPPI 90 is similar to Invesco Capital Shield 140% 90 120% 100% – We note the Exposure to Equity 80% Market for CPPI 90 60% 40% 20% 0% 05/09/03 05/0
Slide 35: The Problem with CPPI 90
34 The Problem with CPPI 90 Lack of Consistent Participation 160% – CPPI 90 suffers from lack of consistent participation after 140% market fall 120% 100% – Over the same period as in the previous simulation, under the 80% same market conditions, there 60% is little market exposure in this No partic
Slide 36: Important Information
35 Important Information This presentation does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder International Selection Fund (the “Company”). Nothing in this presentation should be construed as advice and is therefore not a recommendation to buy or