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Schroders launches Australian Long Short Fund

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MEDIA RELEASE: Schroders has launched the Schroder Australian Equity Long Short Fund to external investors after successfully seeding the fund’s Professional Class in late 2020. The fund aims to deliver returns for investors through long and short investments in growth and value equity markets predominately across Australia and New Zealand.

The fund will be managed by Schroders portfolio managers Ray David and Joseph Koh, who have a combined 40 years of experience in managing equities. Both are based in Sydney.

Mr David said the fund’s objective is to outperform the S&P/ASX 200 Accumulation Index after fees over the medium to long term by investing in, or short selling securities in, a broad range of listed equities in Australian and New Zealand. The fund may also invest up to 10 per cent of its assets internationally.

 “The fund is a fundamental Australian equity strategy that we expect will perform in both growth and value style markets, with additional alpha from selective short positioning,” he said.

“The fund seeks to assess the underlying business fundamentals of stocks, forming a view on the long-term value of these businesses, and investing in those that are undervalued. The fund will also establish short positions in stocks which are over-valued, or alternatively as a hedge for a long position.

“With a long/short strategy, investors will get exposure to quality companies through long-term investment as well as the chance to make returns from short positions in companies that are over-valued,” Mr David said.

Mr Koh added this fund is more likely to be appropriate for investors seeking to improve returns by balancing existing holdings in passive or core equity funds with exposure to a fund with more active positions.

“Investors who are looking for capital growth and income through a smaller part of their portfolio would look to this fund. The risk is relative to the return,” said Mr Koh.

The minimum suggested holding period for the fund is five years.

Mr Koh commented that the Fund will also be managed with reference to ESG factors.

“This means the impact and risk around issues such as climate change, environmental performance, labour standards or corporate governance are considered in the assessment of investments.

“Schroders takes an active approach to ESG and engages with entities held by the fund to challenge identified areas of weakness in ESG performance,” he said.

The fund will have two unit classes on offer – a Wholesale Class (for investments between $20,000 and $500,000) and a Professional Class (for investments over $500,000). For the Wholesale Class, management fees and costs are estimated at 0.8 per cent of the net asset value of the fund. Schroders is entitled to a performance fee of 25 per cent of the fund’s performance (after fees) above the S&P/ASX 200 Accumulation Index.

The Schroder Australian Equity Long Short Fund (Professional Class) has outperformed the benchmark by 9.7% (post-fee) over one year as at 31 October 2021.

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