Euro Corporate Strategy European Credit Team February 2016 For professional investors only. This material is not suitable for retail clients *Schroder International Selection Fund is referred to as Schroder ISF
Schroders Organisational strengths Schroders’ offices Independent Established in 1804 (Investment offices in blue) Amsterdam Madrid Copenhagen Milan Frankfurt Paris Schroder family controls 48%* of voting equity Geneva Rome Bermuda Gibraltar Stockholm Beijing Stable Cayman Islands Guernsey Zurich Hong Mexico City Jersey Kong Strong balance sheet and stable ownership New York London Jakarta Philadelphia Luxembourg Seoul structure Shanghai Singapore We can invest in our business through the market Sydney Taipei cycle Tokyo Focused Asset management is our sole business We have no conflicts of interest Able to support you Global investment resources € 400.0bn AUM across the major asset classes Dubai Buenos Aires São Paulo Source: Schroders, as at 30 September 2015 Chile *As at 31 December 2015 1
Schroders fixed income Funds under management € 400.0bn total AUM * € 102.9bn fixed income division AUM ** 30 September 2015 30 September 2015 Source: Schroders. *Data represents AUM by product sold. **Data represents AUM by investment desk. ^Other includes Convertibles, Insurance Linked, and Alternative Rates Strategies. The charts may not add to 100% due to rounding. 2
Schroders European credit Your investment team – integrated investment and research Sterling Credit Euro Credit High Yield Global Credit Alix Stewart Patrick Vogel Konstantin Leidman Peter Harvey Lucette Yvernault Michael Scott Jonathan Golan, Martin Coucke Financials Communications Utilities Industrials Quantitative Strategy Dan Pearson Robert Kendrick Carter Holloran Rajeev Shah Sam Tomlinson Patrick McCullagh Charlotte Peat Bartek Pastwa Szevak Nszdejan Stephen Hunnisett Rhys Thomas Yow Tzu Lim Alex Stephansen Specialist Fixed Income Portfolio Management Teams Specialist Analyst Teams Specialist Product Team (no. portfolio managers) (no. analysts) (no. specialists) North Quant, Extended European Asia, Australia Portfolio- Credit Rates EMD American Strategy & specific**** Multi-Sector Credit sectors ** Credit & EMD Credit Credit Economy*** 15 24 8 10 11 14 12 14 6 5 5 **Includes municipals, securitised, insurance-linked and convertibles. ***London-based resources only. ****London and Zurich-based resources only. Source: Schroders, as at 31 January 2016. 3
Schroders: Diversified capabilities Local expertise delivered globally Schroders offices Equities Fixed Income EMD and (Investment offices in blue) Amsterdam Madrid Commodities Copenhagen Milan Asian Asia/Pan Pacific Frankfurt Paris Emerging Market Debt – Corporate, High Yield Geneva Rome Emerging Markets Absolute Return Bermuda Gibraltar Stockholm Beijing Cayman Islands Guernsey Zurich Discretionary Money Hong European Mexico City Jersey Kong Management Global Currency New York London Jakarta Global/International Philadelphia Duration specific Luxembourg Seoul Private Equity Shanghai Japan Emerging Market Debt Singapore – Relative Return Sydney Multi-Asset Large, Mid and Taipei Small Cap European Tokyo GAIA Other sector/single (Global Alternative Global country specialist Investor Access Government, QEP Global Balanced Aggregate Single country Hedge Funds – FoF Index Linked and single strategy UK Insurance-Linked Securities Multi-Manager US Other specialist/single Regional Balanced Value, Growth country Dubai Structured Products UK Property – UK Buenos Aires São Paulo and Global Tailored Benchmark US Chile Source: Schroders, as at 31 December 2015 4
Why Schroders for European Credit? Strong consistent track record through bull and bear markets Integrated global investment framework that maximises skills from the global fixed income group and beyond (e.g. macro, EMD, quant, equity team etc.) Credit research fully aligned to credit investment process Innovative themes-based research and investment approach Aim: Continue to be the superior information ratio provider in credit 5
A common approach applied across credit strategies Fund range All ISF EURO ISF EURO Long Dated ISF ISF EURO ISF EURO Maturities Credit Monthly ISF Global Credit Corporate Strategic Credit Value Corporate High Yield Corporate Absolute High Income Multi Credit Conviction Bond Credit Bond Return Benchmark Benchmark Benchmark Benchmark Benchmark Absolute Absolute Type Total Return Total Return Total Return Relative Relative Relative Relative Relative Return Return Ref BM BM +100bp BM +200bp 7-9% total BM +150bp BM +75bp BM+75bp T-Bills +3% 1 st Quartile +3-4% p.a. p.a. gross p.a. gross Euribor +3% return p.a. Objective p.a. gross p.a. gross p.a. gross p.a. gross Peer Group (L+5%) over a cycle over a cycle p.a. gross over the over a cycle over a cycle over a cycle over a cycle Returns gross over a cycle cycle Reference BoA Merrill BoAML only: Ref: BoAML Unconstrain iBoxx Euro Lynch E uro +15Yrs BoAML Barclays BoAML Euro Sterling ed BM Benchmark Corporate High Yield Sterling 3m Euribor 3m UK T-Bill European Multiverse Corporate Non-Gilts agnostic BBB Constrained Non-Gilts ccy HY ex Treasury, All Stocks Index – HEC0 All Stocks Constrained A to B (HPC0) Konstantin Peter Michael Lead Fund Patrick Vogel Patrick Vogel Alix Stewart Alix Stewart Patrick Patrick Konstantin Leidman Harvey Scott Manager Sep 2012 Sep 2012 Aug 2012 Aug 2012 Vogel Vogel Leidman Nov 2012 Apr 2006 Aug 2012 € 6,384m € 990m € 240m € 25m € 100m* Fund Size £862m £292m £1,227m £241m TBC Inception date Jun 2000 Dec 2013 Nov 2012 Feb 2001 Jan 2001 Nov 2015 Apr 2006 Feb 2000 TBL in 2016 TBL in 2016 Source: Schroders as at 31 December 2015. ISF Global Multi Credit to be launched in H1 2016 and Credit Value in H2 2016. * Segregated portfolio funded November 2015 to seed fund launch. 6
European credit performance Our performance is competitive Since current management was in 1 year 2 years (p.a.) place* 31 January 2016 Peer Peer Peer Quartile Quartile Quartile Fund Group Difference Fund Group Difference Fund Group Difference Ranking Ranking Ranking Ave. Ave. Ave. Euro Corporate Bond -0.54 -1.78 +1.24 1 3.98 2.45 +1.53 1 5.13 3.60 +1.53 1 Euro Credit -0.61 -1.78 +1.17 1 4.41 2.45 +1.96 1 4.61 3.55 +1.06 1 Conviction Euro High Yield 1.47 -1.20 +2.67 1 3.24 1.26 +1.98 1 5.87 4.10 +1.77 1 Source: Morningstar peer groups, data as at 31 January 2016. Schroder ISF Euro Corp Bd A Acc, Schroder ISF Euro Credit Convct A Acc. Grouped by: Morningstar Category - EAA OE EUR Corporate Bond. Schroder ISF Euro High Yield A Acc grouped by EAA OE EUR High Yield Bond. *Euro Corporate Bond : Patrick took over managing 01/09/2012. Euro Credit Conviction: Launched 18/12/13. Euro High Yield: Launched 14/11/12. 7
European Credit composite performance Competitive performance across the range Composite 1yr Excess Return 2yr Excess Return p.a. 3yr Excess Return p.a. 3yr Information Ratio Benchmarked Strategies Euro Corporate Bond 1.25% 1.68% 2.00% 2.70 Euro Credit Conviction 2.06% 2.52% - 2.59* Euro High Yield 3.70% 2.13% 1.49% 1.31 Composite 1yr Return 2yr Return p.a. 3yr Return p.a. 3yr Sharpe Ratio Unconstrained Total Return Strategies Monthly High Income 4.51% 5.76% 7.53% 1.68 Strategic Credit 2.09% 2.62% 3.44% 1.43 Source: Schroders GIPS composite data to 31 January 2016. Data from the current investment team. * Euro Credit Conviction composite Incepted 31 January 2014. 8
Performance track record Monthly excess returns (up and down markets) Schroders Euro Corporate Bond Composite Up markets Down markets 9
Process
Our approach to portfolio management Integrated investment process Broader team approach to investment management Hands-on involvement with credit research Innovative and creative evolution of the investment process Themes-based investment style A formalised procedure that continually reviews the process to successfully deliver performance in varying investment environments A balanced portfolio construction Aiming for consistent out-performance of the market by implementing different investment themes into the strategy Portfolio construction focuses on building low correlated alpha sources while minimising risk Include offsets in portfolio construction to ensure not all themes are pointing in same direction 11
Investment process overview Themes-driven process Risk Management Multiple Credit Investment Themes Diversified by theme Credit Strategy Diversified by horizon Input Credit Scorecard • Fundamentals Security selection • Valuations 37 credit analysts • Systemic Fully aligned research process • Technical Output Cross market relative value Risk bias Source: Schroders 12
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