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Wednesday, March 19, 2014|
Schroders Shares Forecasts at its Media Breakfast
Schroders, a U.K.-based asset management firm that has been looking to grow its U.S. footprint, held its annual media event at the posh New York Palace Hotel this morning, and Alan Brown, the firm's senior advisor and former CIO, and several investment experts discussed the firm's plans, market conditions and opportunities.
After munching on breakfast burritos, fruit and pastry, some 50 attendees were invited to listen to introductions by Brown and Karl Dasher, CEO for North America and co-head of Fixed-Income, on the firm's current position and investment plans going forward.
Schroders manages $435.4 billion in global assets (with about $54.5 billion in U.S. money), which were partly bolstered by Schroders' acquisition of $11 billion STW Fixed Income Management last year. Dasher says the amount of U.S. assets has doubled in the past five years and Schroders is looking to double it again in the next three to five years.
Following investors' "near death experience" in 2008-09, the firm and its clients have been looking to more outcome-oriented solutions, so the firm's Multi-Asset Investments group has been growing and working on building risk allocation, rather than asset allocation, strategies for both retail and institutional clients.
Even though the return potential for bonds going forward appears to be low, Schroders' fixed-income portfolio managers are optimistic about some sectors. Although turmoil, uncertainty and political upheaval continue to roil the emerging markets, Jim Barrineau, co-head of emerging market debt at Schroders, says investors can benefit from cherry-picking the right EM debt areas and that it's one of the few sectors that has adapted to the Fed's tapering of its asset purchasing program.
"People are starting to differentiate between good EM debt and bad EM debt," he said.
Investment grade corporate bonds can also serve as a risk reduction benefit within a portfolio, said Wes Sparks, head of U.S. taxable fixed income. Andy Charlton, portfolio manager on the Fixed Income Value team, thinks that municipal bonds are the next place to go from a relative value perspective. Sparks also said that he is more concerned about hedging interest rate risk rather than credit risk right now.
Schroders' equity experts said that with the U.S. economy having made a comeback and Europe being on its way back, stock return potential should still be good in these areas. Bob Kaynor, research director of U.S. small and mid-cap equities, said industries like housing, transportation and aviation, which have undergone dramatic transformations in recent years, will be ones to watch. Allan Conway, Schroders' head of emerging market equities said he's still negative on the sector given all the headwinds surrounding it, but thinks some regions should lead to an avalanche of cheap investment opportunities by the end of this year.
"It's a question of timing," he said.
Nico Marais, head of multi-asset investment and portfolio solutions, said he is working with clients on diversified portfolios targeted toward the investor's specific goals rather than a rigid asset allocation. Brown agreed that these mandates need to be as unconstrained and as flexible as possible to dampen volatility and compensate for low return forecasts in traditional fixed income.
"One of the mistakes that money managers make is failing to manage expectations with clients," Marais said. Something that concerns him is that "everything seems to be priced in right now. Nothing seems to be attractive" from a value investing standpoint.
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