Schroders announced the launch of its Global Multi-Factor Equity (GMFE) fund, a diversified investment strategy which targets consistent outperformance in a risk-controlled way.
The GMFE fund’s systematic factor-based investment process could be an ideal low-governance solution for UK Defined Contribution (DC) pension schemes.
The cost-effective fund will adopt a bottom-up investment approach, allocating to an optimised blend of stocks that are attractive across multiple factors including quality, momentum, value, low volatility and small-cap.
The fund’s integrated and systematic approach will seek to decrease the performance variability of investing in individual factors and to give trustees the peace of mind that investment risk is being minimised. It will also seek to incorporate ongoing factor-based research into its process to ensure the fund is continually improved.
The fund’s ongoing charge figure of 24 basis points will also ensure that DC savers, for whom every additional penny is important, should benefit from a value-for-money investment innovation. It will aim to outperform the MSCI All Country World index over the long term, while also delivering low benchmark-relative risk.
It will be managed by Schroders Advanced Beta Team, which was set up in 2013 and manages £4.6bn.
Tim Horne, head of UK Institutional DC, Schroders, said: “This value-for-money fund will seek to enable DC savers to benefit from a new way of equity investing. Governance and costs are rightly a key focus for UK DC pensions, but this should not come at the expense of returns – the key element which will ensure people can retire with confidence and security.
“GMFE brings investment innovation to the DC saver, targeting additional return compared to a passive equity solution in a risk-controlled way.”
Ashley Lester, Schroders’ head of Multi-Asset Research and co-manager of the GMFE fund, said: “Factor investing is a powerful tool for managing investments. By breaking down assets into factors, it can provide greater transparency of portfolio construction and greater control over the drivers of risk and return.
“While many of the concepts behind factor investing are nearly as old as investing itself, much newer is the idea of bring them together systematically. The GMFE fund aims to allow investors to benefit from the key drivers of market returns in a risk-controlled way.”