assessment of value (aov) report - schroders

Assessment of Value (AoV) Report

October 2020

James Rainbow Chairman of Schroder Unit Trusts Limited

I have worked at Schroders through all types of market conditions. It means I have seen first-hand how the company’s deeply ingrained culture leads us to the right decisions, regardless of how tough the environment gets.We always focus on doing the right thing for our clients, but also for our people and for the wider society. It is about delivering positive outcomes for all.

As part of this continued commitment to clients, Authorised Fund Managers (AFMs), such as Schroders, now follow the new reporting responsibility set by the Financial Conduct Authority (FCA).

This means completing an Assessment of Value report annually for each UK-domiciled investment fund that we manage, in which we should consider robustly and in detail whether we are delivering value to investors across a range of areas.

This is the second part of our first Assessment of Value report, this time covering our Wealth funds. The report aligns with our core purpose, which is to create a better future by investing responsibly for our clients. Our focus on providing the best possible service to investors is at the forefront of everything we do.

The data for this report was collected at the end of 30 June 2020. As I write this statement in October 2020, we are coming to the end of an unprecedented year socially and economically. The disruption caused by the spread of Covid-19 has made it a challenging year for all of us. At such a time it is as important as ever that we ensure we are delivering value to our investors.

Members of the board of the AFM, Schroder Unit Trusts Limited (SUTL), work together to represent the best interests of investors and to provide fair and balanced conclusions on the value provided by our funds.

We have given our approach to producing this report a great deal of thought. We believe the result is a rigorous process for assessing value. Naturally, it considers all the relevant information and data investors need.

We have also sought to introduce governance structures that make sure we are measuring value in the best possible way. We have worked with third-parties to ensure our report is robust and clear for our investors to understand. As well as using external experts to validate our approach, we tested how we report our findings with private investors and advisers.

There are always opportunities for improvement and it is important that we take appropriate action when necessary. Where this report identifies that certain funds are not demonstrating value consistently, for instance in the Performance area, we have completed a further review and shared the measures that we have taken, or plan to take, to address the issues we have identified.

We are proud of our long history of adapting to meet the challenges of the times and keeping our focus on the need to deliver value to our clients at all times. In these uncertain markets, we are going to see greater opportunities for active managers like us to differentiate and demonstrate value to our clients.

We hope this report will help to promote enhanced transparency, governance and outcomes for all investors, ultimately strengthening trust in the asset management industry. We also hope it will reassure and empower our clients, providing a clear breakdown of the overall value that our funds provide.

Chairman’s Letter

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“We hope this report will help to promote enhanced transparency, governance and outcomes for all investors, ultimately strengthening trust in the asset management industry.”

Schroder Managed Wealth Portfolio 8

SUTL Cazenove Charity Bond Fund 10

SUTL Cazenove Charity Equity Income Fund 12

SUTL Cazenove Charity Equity Value Fund 14

SUTL Cazenove GBP Balanced Fund 16

SUTL Cazenove GBP Growth Fund 18

SUTL Cazenove Charity Multi-Asset Fund 20

SUTL Cazenove Charity Responsible Multi-Asset Fund 22

Contents

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Key: Demonstrating value

Completed a further review, demonstrating value

Completed a further review, not demonstrating value consistently

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Chairman’s Letter – James Rainbow, Chairman of Schroder Unit Trusts Limited 1

Schroder Unit Trusts Ltd (SUTL) board of directors 3

Introduction 5

Seven areas 6

Funds 8

Glossary 24

This document has interactive elements, please click the text menu below to navigate to that page.

Click this icon (situated in the top right of each page) to return back to the contents page.

James Rainbow Head of UK Distribution and Latin America

Carolina Minio-PaluelloGlobal Head of Product, Solutions and Quant

Paul ChislettHead of Asset Management Finance

Schroder Unit Trusts Limited (SUTL) board of directorsThe SUTL board, which includes executive directors and independent non-executive directors, is responsible for representing the best interests of investors and ensuring the outcomes of the Assessment of Value are clear and fair. Our independent non-executive directors bring an external perspective to support our executive directors and undertake a key role providing independent oversight and challenging the approach taken where necessary.

Carolina Minio-Paluello is the Chief Executive Officer (CEO) of SUTL and joined the board in December 2019

Carolina is currently Global Head of Product, Solutions and Quant at Schroders. She was appointed to this role in 2019 and has over 20 years of industry experience.

As CEO of SUTL, Carolina is responsible for the conduct of the business and plays a key role in the decision-making process. She also supports the Chairman in carrying out his regulatory duties.

James Rainbow is the Chairman of SUTL and joined the board in December 2019

James is currently Head of UK Distribution and Latin America at Schroders. He joined Schroders in 2007 and has over 20 years of industry experience.

As Chairman of the SUTL board, James holds the regulatory responsibility to ensure SUTL complies with its obligation as Authorised Fund Manager (AFM) to carry out the Assessment of Value, recruit independent directors and act in the best interests of investors.

Paul Chislett is an executive director of SUTL and joined the board in July 2013

Paul is currently Head of Asset Management Finance at Schroders, a role he has held since 2013. Paul is a chartered management accountant with over 20 years of industry experience.

Executive directors

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Stephen ReedyHead of EMEA Operations Hub

Howard WilliamsIndependent Non-Executive Director

Paul Truscott Regional Head of Product Development - (UK and Europe)

Calum Thomson Independent Non-Executive Director

Calum Thomson is an independent non-executive director of SUTL and was appointed to the board in July 2017

Calum is a former Senior Audit Partner at Deloitte LLP and currently holds a number of non-executive directorships within the investment industry. He has over 25 years of industry experience.

Paul Truscott is an executive director of SUTL and joined the board in July 2019

Paul is currently Regional Head of Product Development (UK and Europe) at Schroders. He joined Schroders in 1991 and is a chartered management accountant with over 25 years of industry experience.

Howard Williams is an independent non-executive director of SUTL and was appointed to the board in February 2018

Howard worked for 23 years at JP Morgan Asset Management where he was the Chief Investment Officer and Head of Global Equities. He has over 35 years of industry experience.

Stephen Reedy is an executive director of SUTL and joined the board in December 2019

Stephen is currently Head of EMEA Operations Hub at Schroders, providing operational services across the region. He joined Schroders in 2019 and is a chartered accountant with over 25 years of industry experience.

Independent non-executive directors

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Introduction

Throughout this report, the Schroder Unit Trusts Limited (SUTL) board, will be referred to as ‘we’.

Who is the report designed for?

This annual Assessment of Value report is aimed at individuals who invest in our UK-domiciled wealth management funds, or their advisers. It outlines each fund’s assessment and concludes on whether we believe that we have demonstrated value.

Wealth management is a core business and strategic priority within the Schroders group. In the UK and Channel Islands, our wealth management division advises high net worth individuals, family offices and charities under the Cazenove Capital brand.

How should you use it?We recommend that you take time to read the ‘Seven areas’ section to understand how we have made our assessment, which has been conducted using data as at 30 June 2020.

Our conclusions on each fund are set out separately in each individual fund’s report.

You should review the report for each fund that you are invested in and decide whether you feel the product is still suitable for your needs and delivering what you expected from it.

The report complements other fund documentation such as the Factsheet and the Key Investor Document (KID) or Key Investor Information Document (KIID). If you wish to see the underlying performance data in conjunction with this document please refer to the relevant fund’s latest Factsheet or KIID.

The document is interactive; please use the Contents page to navigate your way around it.

We have included a glossary at the back of the document to define the technical terms which some investors may not be familiar with.

What will it tell you?

The FCA has asked us to look at seven specific areas when assessing the value we deliver to our investors:

1. Performance – has the fund performed in line with expectations?

2. Quality of service – are we meeting expectations on the service we deliver?

3. General costs of the authorised fund manager – are the fees charged to the fund reasonable and appropriate?

4. Comparable market rates – how do our fees compare against competitors?

5. Economies of scale – do our funds enjoy cost savings as they grow?

6. Comparable services – how do the fees we charge your fund compare with what we charge clients for similar products?

7. Classes of shares or units – are you in the most appropriate type of share or unit?

The Assessment of Value does not assess the value of any associated investment management services we may provide to investors, as investment in a fund may be only one component of the investment strategy proposed to the client. Further, such investment management services are charged outside of the fund and covered by a separate service management charge.

Please follow the link here to find the detail of the regulation in COLL 6.6.21.

How do we determine the overall value delivered by a fund?

Each area is considered separately for every fund and is given equal weighting. This contributes to an overall assessment as to whether or not we believe that we have delivered value to our clients. This incorporates both qualitative information as well as quantitative data.

How have we produced the report?

The Product Governance Team at Schroders is responsible for the delivery of the Assessment of Value report. It validated its methodology with support from an independent consultancy firm to ensure its robustness and impartiality. Once the assessment was completed, the findings were presented to several governing bodies, the Product Governance Committee and the SUTL board, who reviewed and validated the conclusions drawn.

It is our responsibility to consider the outcomes of these assessments and to ensure that they are clear and fair. The board, which includes a number of Independent Non-Executive Directors (INEDs), is responsible for acting in the best interests of investors and challenging the approach taken where necessary.

In this report we communicate for each fund if we have delivered value or, if not, where we need to improve and what changes we are proposing.

What do the icons used throughout the report represent?

We have used iconography to help you understand the outcome of our assessment of each area.

Where an area has this icon, we believe that the fund is demonstrating value in that area.

Where an area has this icon, we have concluded that the fund is demonstrating value in that area. However, our initial quantitative review indicated that further qualitative analysis was required before we could conclude that the fund is demonstrating value. We believe the combination of these reviews ensures you are provided with a comprehensive conclusion.

Where an area has this icon, we recognise that the fund is not demonstrating value in that area consistently. We have completed a further review and shared the outcomes with you.

What to do if you have any questions

You can contact us at [email protected] if you have any further questions. You may wish to discuss your question with your usual Cazenove Capital contact.

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https://www.handbook.fca.org.uk/handbook/COLL/6/6.html

mailto:wmteam%40cazenovecapital.com?subject=Assessment%20of%20Value

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Performance

Quality of service

AFM Costs3

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Seven areas

For each of the seven areas, we have considered the following detail as part of our assessment

We think clients can reasonably expect funds to meet their investment objectives, albeit with the knowledge that they are not guaranteed. To give us an indication of how well a fund is doing this, we assess the returns of each share class over the performance period, which is the length of time over which we expect the fund to deliver its investment objective. If we have given a range of time, then for the purposes of this report we look at the upper end of the range. For example, if the range is five-to-seven years, we assess the delivery of the investment objective over seven

years. We acknowledge that sometimes funds will underperform their investment objective given their particular investment style. We consider a number of measures over that time period to make a judgement on whether or not the investment objectives are being met.

Several elements contribute to the service we offer all of our clients, in particular, fund operations, investment process and the client experience. We assess whether we are delivering each of these well enough to create value for our clients.

We assess whether key aspects of fund operations have met or exceeded the rigorous internal and external standards that have been set for them. These standards, known as Key Performance Indicators (KPIs), enable Cazenove Capital to provide both accurate and timely financial reporting to both our clients and the regulators.

The strength of our investment process for each fund is validated through a number of governance processes and forums. The fund manager is responsible for assessing the suitability of asset allocation and stock selection changes recommended by the Wealth Management Investment Committee (WMIC) for the fund in question.

The WMIC is chaired by the Chief Investment Officer, Caspar Rock, who is supported by 21 investment specialists.

The WMIC take inputs from the Cazenove Capital in-house Investment Strategy and Economics team, as well as from the economics, strategy and multi-asset capabilities of the wider Schroders Group.

Additionally, for monitoring and measuring Environmental, Social and Corporate Governance (ESG) factors, WMIC uses Schroders’ SustainEx tool.

In 2019, Schroders was one of four investment companies to be awarded the top rating by investment research firm Square Mile in its ESG Integration and Responsibility ratings.

We also review our own governance around liquidity and risk management to assess whether the policies and procedures we have in place are robust and fit for purpose.

Communications also form an important part of our clients’ experience, and we evaluate these to ensure they are relevant, current and tailored to a client’s needs.

We review every cost component of the Ongoing Charges Figure (OCF) at a share class level. This includes a detailed assessment of our management, administration and ‘other’ costs (see glossary for definition). We then compare these costs against what we charge our investors to assess whether they are appropriate, whilst at the same allowing us to:

– Remain a well-capitalised business

– Continue to operate during stress scenarios

– Continue to innovate and develop new products

Our Wealth funds are moving to an “all-in fee” to make charging structures simpler and easier to understand. This means that clients will pay a single fee which will be set with reference to the OCF. We will communicate the timelines for delivery as soon as possible.

For funds with third party fund manager costs, these costs will continue to be disclosed separately. This is to provide transparency of third party fund manager costs, given that they can vary.

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Economies of Scale

Comparable market rates

Comparable Services

Classes of Units7

We assess whether there are potential economies of scale in the fund and whether or not these have been achieved in practice. If that is the case, we then consider whether that benefit is being reflected in lower charges for clients. Every fund can, in theory, benefit from economies of scale but whether or not your fund does will depend on the overall fund size.

A fund can generate economies of scale as it grows. This is because we are able to manage larger funds more efficiently, meaning that our relative costs of managing the fund decrease as the size of the fund grows. We

have determined that funds generally generate meaningful economies of scale when a fund grows to assets under management of £1 billion, although this can vary depending on the type of investments that we manage for you.

We have therefore determined that it is appropriate that we share some of these savings with you. This means that we will soon be implementing scale discounts in retail share classes for every fund that is larger than £1 billion.

We assess the amount we charge our investors at a share class level by comparing the price of our funds against either the price of peers in the relevant Investment Association (IA) Sector or the Asset Risk Consultants (ARC) Multi-Asset Charity Fund Review. As the investment approach of funds in an IA Sector can vary, we also assess each fund against a customised peer group, where applicable.

The funds in the customised peer groups are selected by an independent third party on the basis that they are more directly comparable than other funds in the relevant IA Sector.

We manage money for a range of different clients all over the world. In particular instances, some of that money is managed in the same way as your fund. Where this is the case, we have compared different types of clients and the services that they receive in relation to the fees that we charge, and assessed whether they are reasonable and appropriate. If we identify that there are disparities which we believe are not reasonable or appropriate, we will be making changes to fees.

Many funds are created in a bespoke way for our clients and this means there is no service offered which can act as a direct comparison.

Where there are different classes of shares (or units) in your fund, we compare the value we deliver across these.

What are share classes?For some of our funds, we issue different types of shares (or units if your fund is a unit trust). These are called ‘share classes’ or ‘unit classes’ and can differ for various reasons. For example, you could hold a share class that was set up specifically so that you could buy it through an adviser. If you are invested in a bespoke fund it is likely your fund will only have one share class.

How do you find what share class you are invested in?Your periodic statements will highlight the share class you are invested in.

How do we assess share class charges?We review the charges across all share classes or unit classes in your fund. We look at all the share classes or unit classes that serve broadly the same purpose and compare those charges. Our aim is that our clients are invested in the share class that is the best price for them, given how they are investing and the features they are looking for. We will keep reviewing the charges on all of our share classes whenever we launch new funds or create new share classes.

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Fund Name: Assessment outcomes1. Performance

4. Comparable market rates

6. Comparable services

7. Classes of shares or units

2. Quality of service

1 Performance

Investment objective

Overall conclusion

Schroder Managed Wealth Portfolio

The fund aims to achieve capital growth and income of inflation (as measured by the UK Consumer Price Index) plus 3.5% per annum (after fees have been deducted) over a five to seven year period by investing in a diversified range of assets and markets worldwide. This cannot be guaranteed and your capital is at risk.

Taking into account all seven areas included in the assessment of value, we believe that the fund is demonstrating value overall. We have summarised our assessment of each area as it relates to this fund separately below. Where an area has resulted in an action being taken or is undergoing a further review, we have shared the steps we have taken or will take to try and improve this area with you below.

Performance Commentary:

Over the 7-year performance period, the fund has marginally underperformed its target benchmark (UK CPI+3.5%), returning 4.4% per annum vs the benchmark’s 4.5% per annum. However, the fund has outperformed its comparator benchmark (ARC PCI GBP Sterling Balanced), with performance of 4.4% per annum vs. the benchmark’s 4.1% per annum over the period. We have long had a low exposure to fixed income assets such as bonds as we did not expect yields to be attractive. However, these performed relatively well over the period. Where we did hold fixed income assets, we were positioned with a low sensitivity to changes in interest rates (this is known as having “short duration”). This was in the expectation that bond yields would rise (bond prices fall as yields rise), when in fact they fell.

In order to outperform the fund’s “inflation plus” target benchmark of CPI+3.5% over the performance period, this multi-asset strategy needs to hold a reasonable weighting in risk assets such as equities. However, at such volatile times as seen at the start of 2020, multi-asset strategies that target a benchmark of “inflation plus” tend to underperform in the short term. It should be noted that the target benchmark for this strategy is not directly investible. Instead, we created a strategic asset allocation model which builds a portfolio that we believe should over the longer-term produce a return in excess of this benchmark.

Remedial Actions:

This fund has beaten its comparator benchmark and has marginally underperformed its target benchmark. We have continued to re-evaluate the core asset allocation in light of the changing economic climate. As a result we have sold all our positions in hedge funds and emerging market debt. We are looking to invest more in “growth” style equities where investors are willing to pay a premium on the basis of a company’s future growth prospects. In addition, we have also reduced the UK home bias within our equity allocation, in favour of adding to our international equity exposure.

We have confidence in the fund’s investment strategy and in Schroders’ ability to deliver on its investment objective in the future.


5. Economies of scale

3. General costs of authorised manager

Key: Demonstrating value Completed a further review, demonstrating value


Please refer to the fund’s factsheet here for performance data as at 30 June 2020.

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The assessment has been completed using data as at 30/06/2020

https://www.schroders.com/getfunddocument/?oid=1.9.3821478

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Classes of shares or units

Comparable services

4 Comparable market rates

5 Economies of scale

2 Quality of service 3 General costs of

authorised fund manager

In the fourth quarter of 2019 we looked at charges across all of the share classes in your fund. Find your share class in the list below to see whether we have made any changes to your holding:

– If you are invested in the A Share Class and have ongoing advice, we are not making any change to the charges as these are set up to pay your adviser an annual commission. This share class is the most cost effective share class we offer with that feature.

– If you held A Shares and you invested directly with Schroders, it is likely you were moved to the Z Share Class in 2019 and are being charged lower fees as a result. A further conversion covering a small number of additional investors is planned, and we will be communicating timelines to those impacted within the next few months.

We have reviewed the fee rates of funds from Schroder Unit Trusts Limited (SUTL) against those of other non-UK domiciled funds that Cazenove Capital manages. This fund has fee rates that are the same as equivalent funds in the same investment strategy. We have therefore concluded that the fees associated with this fund are reasonable and appropriate.

Due to the bespoke nature of this fund, it is not comparable to any of the Investment Association’s sectors and therefore has no peer group that we can compare the fund’s charges against.

The fund you invest in is not large enough (defined as fund assets under management greater then £1 billion) to realise economies of scale. Therefore it does not benefit from cost savings achieved from size. However, as it may be able to attain them as it grows, we will continue to assess this and will notify you if the position changes.

In reviewing the quality of the service we provide our clients, we have assessed key service areas relating to our fund operations, our investment process and the quality of our client experience. We also looked at our liquidity management process. We concluded that we have a mature and effective framework for the oversight and reporting of liquidity risks in the funds we manage. Through all our metrics we have concluded that, in terms of quality of service, we provide value to our clients. For more detail on how we completed this assessment, please refer to the ‘Seven areas’ section in the front of this report.

We reviewed every cost component of the Ongoing Charges Figure (OCF) at a share class level. We concluded that in relation to each charge, the costs of providing the service to which the charge relates are reasonable and appropriate. For more detail on how we completed this assessment, please refer to the ‘Seven areas’ section in the front of this report.


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1 Performance


Overall conclusion

SUTL Cazenove Charity Bond Fund

The fund aims to provide income by investing in bonds. The fund aims to provide a total return in excess of the FTSE A Government All Stocks (Gross Total Return) index (after fees have been deducted) over rolling five-year periods but this cannot be guaranteed and your capital is at risk.

Taking into account all seven areas included in the assessment of value, we believe that the fund is demonstrating value overall. We have summarised our assessment of each area as it relates to this fund separately below.

We have assessed whether the fund has delivered its investment objective over the performance period of five years. Over that time period the fund has delivered on its investment objective. We have concluded that, in terms of performance, the fund is delivering value. For more detail on how we completed this assessment, please refer to the ‘Seven areas’ section in the front of this report.








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Comparable services





We have looked at charges across all of the share and unit classes in this fund. Our assessment has concluded that there are no other share or unit classes that serve broadly the same purpose as the one you are currently in, thus we have not made any changes to your holding.

Due to the bespoke nature of this fund, there are no services offered which can act as a direct comparison.

Our assessment found that this fund is lower-priced than the majority of its peers, and is therefore demonstrating value to our clients by being competitively priced.





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1 Performance


Overall conclusion

SUTL Cazenove Charity Equity Income Fund

The fund aims to provide income and capital growth by investing in equities of UK companies. The fund aims to provide income in excess of the FTSE All Share Index yield and a total return that exceeds the FTSE All Share Index (after fees have been deducted) over rolling 5-year periods but this cannot be guaranteed and your capital is at risk.



The fund had a bias towards the “value” style of investing over the 5 year performance period. This involves buying what we believe are good quality companies that have been overlooked by the market and are trading at a significant discount to their true value. Specifically, our positions in value stocks like consumer finance firm Provident Financial, retailer M&S and telecoms firms Vodafone and BT affected relative performance. At the same time, we did not benefit from the strong performance of higher-valued stocks like Diageo and Experian as our exposure to these companies was lower than the benchmark.

Most recently, the fund’s holdings in homebuilder Crest Nicholson, airline Easyjet, bank RBS and ten-pin bowling operator Hollywood Bowl underperformed

in the first half of 2020 due to the negative impact of Covid-19 on their businesses. During this period we also did not benefit from the good performance of consumer goods firm Reckitt Benckiser and British American Tobacco. Environmental, Social and Corporate Governance (ESG) restrictions mean that this fund would are not able to hold companies such as British American Tobacco.

Remedial Actions:

The fund manager Matt Hudson left Schroders in February 2020 and was replaced by the new managers Sue Noffke and Matt Bennison. They apply the investment approach that they also use on Schroder Income Growth Fund plc, an investment trust. The fund had previously been managed via a so-called “business cycle” approach; this meant identifying stock opportunities on a “top-down” basis, which focuses on the current stage of the economic cycle. The new managers are adopting a less fettered approach to stock selection which focuses on a “bottom-up”, balanced stock picking approach to generating income.









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1 Performance


Overall conclusion

SUTL Cazenove Charity Equity Value Fund

The fund aims to provide income and capital growth by investing in equities of UK companies. The fund aims to provide a return in excess of the FTSE All-Share (Gross Total Return) index (after fees have been deducted) over 5-year rolling periods but this cannot be guaranteed and your capital is at risk.



The fund is managed in a “value” style. This means seeking out what we believe are good quality companies that have been overlooked by the market and are trading at a significant discount to their true value.

Broadly speaking, stock markets have performed well over the past five years. However, the best returns have come from a relatively small number of shares. These have typically been “growth” companies, where investors are willing to pay a premium on the basis of their future growth prospects. The popularity of these shares has caused them to become ever more expensive as investors have been willing to pay even more for them than in the past. Investors’ eagerness to own growth assets at this point in the cycle is evidence of a classic behavioural bias where investors think that what is performing well now must continue to perform well in the future. In this sort of market environment it is not unusual

for our style to underperform. While the fund has performed well in absolute terms, relative performance has been disappointing. There have been a small number of stock specific issues in the portfolio over the past five years. An example of a particularly poor performer is energy company Centrica, which in hindsight we bought too early. However, as long term investors we are prepared to wait for the company to get back on its feet, and believe this will ultimately be reflected in a higher share price.

Remedial Actions:

We place significant emphasis on detailed valuation and accounting analysis, particularly regarding a company’s financial or balance sheet strength. Through fundamental research and by looking beyond the short-term market ‘noise’ and behavioural biases, we believe we can identify companies that trade at a substantial discount to their fair or intrinsic value. During this period of underperformance we have re-examined all of the positions in the fund, reviewed fund turnover and assessed the consistency of our style bias. It is our firm belief that we hold a basket of companies with attractive risk / reward profiles, and that those clients that choose to stay the course will be well-rewarded for their patience.









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1 Performance


Overall conclusion

SUTL Cazenove GBP Balanced Fund

The fund aims to provide capital growth and income of inflation (as measured by the UK Consumer Price Index) plus 3.25% (after fees have been deducted) over a five to seven year period by investing in a diversified range of assets and markets worldwide. This cannot be guaranteed and your capital is at risk.


This fund has less than 5 years of performance history, meaning it has not been active long enough to reach its minimum performance period. Therefore we are unable to use this as an accurate measure of performance, which should be assessed over the time period outlined in the investment objective. We have concluded from our assessment of the performance criteria that we are delivering value. For more detail on how we completed this assessment, please refer to the ‘Seven areas’ section in the front of this report.








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1 Performance


Overall conclusion

SUTL Cazenove GBP Growth Fund

The fund aims to provide capital growth and income of inflation (as measured by the UK Consumer Price Index) plus 4% (after fees have been deducted) over a five to seven year period by investing in a diversified range of assets and markets worldwide. This cannot be guaranteed and your capital is at risk.










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1 Performance


Overall conclusion

SUTL Cazenove Charity Multi-Asset Fund

The fund aims to provide income and capital growth in excess of inflation (as measured by the UK Consumer Price Index) plus 4% per annum (after fees have been deducted) over rolling 10-year periods by investing in equities, bonds and alternative assets worldwide. This cannot be guaranteed and your capital is at risk.


We have assessed whether the fund has delivered its investment objective over the performance period of ten years. Over that time period the fund has delivered on its investment objective. We have concluded that, in terms of performance, the fund is delivering value. For more detail on how we completed this assessment, please refer to the ‘Seven areas’ section in the front of this report.






Please refer to the fund’s KIID here for performance data as at 26 June 2020.


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Comparable services







For this fund, we assessed the amount we charge our investors at a share class level by comparing the price of our fund against those of comparable charity funds, with reference ARC’s Multi-Asset Charity Fund Review. Our assessment found that this fund is more expensive than the majority of its peers. We conducted further analysis of our pricing as a result. We identified that there were some inconsistencies in the pricing submitted by peers to ARC’s Multi-Asset Charity Fund Review. In some instances the price quoted in the review was not in line with the price published in the relevant peer’s Key Investor Information Document (KIID). When compared to the peer KIID prices, this fund is priced competitively given its multi-asset, multi-manager features.





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1 Performance


Overall conclusion

SUTL Cazenove Charity Responsible Multi-Asset Fund

The fund aims to provide income and capital growth in excess of inflation (as measured by the UK Consumer Price Index) plus 4% per annum (after fees have been deducted) over rolling 10-year periods by investing in equities, fixed and floating rates securities and alternative assets worldwide. This cannot be guaranteed and your capital is at risk.








Please refer to the fund’s KIID here for performance data as at 26 June 2020.


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Glossary of Terms for Assessment of Value reports Absolute returnA positive return over rolling 12 month periods.

All-in feeThe all-in fee is the total yearly fee that Schroders charges a fund, comprising the ongoing charges figure (the annual management charge (AMC), the administration charge and other operating costs that the fund pays to the trustee (or depositary), custodian, auditor and regulator). This fee does not include transaction costs or (depending on how the investor purchased the fund) any additional fee paid to a platform or to a financial intermediary, including potentially an ongoing advice fee. Please also see entry for OCF (ongoing charges figure).

AMC (annual management charge)This is the yearly fee an investment manager charges to manage a fund, and forms part of the all-in fee. It is generally a percentage of the assets of the fund, for example 0.6% of the fund’s assets per annum. The AMC is automatically deducted from the assets of the fund.

ARC’s Multi-Asset Charity Fund Review The Multi-Asset Charity Fund Review is published by ARC (an external consultancy firm) on a quarterly basis. The Multi-Asset Charity Fund Review covers all the charity specific multi-asset funds available to charities in the UK. The review aims to provide an overview of the multi-asset charity fund sector to current and potential investors and their advisers. For comparison, the report includes AMC and OCF information for all of the funds.

Assessment of ValueAs a result of new regulations, the FCA now requires managers of UK funds to publish an annual report demonstrating how they are providing value to investors in their funds.

Authorised Fund ManagerThe authorised fund manager (AFM) is responsible for the overall management of the fund, investing money on behalf of clients. An authorised investment fund is one that is authorised and regulated by the UK financial regulator, the FCA. Please also see Financial Conduct Authority entry.

BenchmarkA benchmark is typically an index or a market average against which an investment fund’s performance is measured.

Bond A bond is a way for governments and companies (the issuers of the bond) to borrow money for a certain amount of time. A typical arrangement would be in exchange for an upfront payment from an investor, the issuer will make periodic interest payments to the investor and then repay the initial investment amount at the end of the bond’s term (its maturity).

Bottom-upAn investment strategy, whereby an investor looks at microeconomic variables such as balance sheets and market conditions to determine investment decisions.

Business cycleThe business cycle is also referred to as the “economic cycle”. Essentially it describes how business activity goes up and down over time. There are four stages of the business or economic cycle: expansion, slowdown, recession and recovery.

Cazenove CapitalA long-established wealth manager, part of the Schroders group.

CPI (Consumer Price Index) Please also see the entry for inflation.

The Consumer Price Index (CPI) measures how much prices of consumer goods and services change over a period of time. For example, if CPI is 2.5% for the 12 months ending January 2020, this means that on average, the price of consumer goods will be about 2.5% higher than they were in January 2019.

Domicile (e.g. a UK-domiciled fund) A fund’s domicile is basically its country of residence. It determines how a fund is to be treated from a tax perspective much as your domicile (i.e. your permanent home) determines what tax legislation applies to you. Schroders has a range of unit trust funds that are UK-domiciled while the Schroder International Selection Fund range is domiciled in Luxembourg.

Economies of scale “Economies of scale” describes how it becomes cheaper to produce something when you are producing large quantities of it. Effectively, production becomes more economical because you can divide the cost over a greater number of units.

Economic cycle Also referred to as the “business cycle”. Essentially this describes how activity goes up and down over time. There are four stages of the business or economic cycle: expansion, slowdown, recession and recovery.

Emerging markets Emerging markets are those countries that have rapidly growing, developing economies and may still be going through the process of industrialisation. This is compared to developed markets which have already undergone this process and are considered to be already economically advanced.

Equities Also known as “shares” or “stocks”, this represents a share in the ownership of a company.

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ESG (Environmental, Social and Governance) ESG represents environmental, social and governance considerations and covers issues such as climate change, energy use, labour standards, supply chain management and how well a company is run.

ETF (Exchange-Traded Fund) ETFs usually track an underlying index and trade just as a normal stock would on an exchange. ETFs can track stocks in a single industry or an entire index of equities.

FCA (Financial Conduct Authority) The FCA regulates the UK’s financial markets. Its objective is to make financial markets work well – for individuals, for business and for the economy as a whole.

FTSE All Share A price-weighted index comprising approximately 650 of the top UK publicly listed companies.

Gilt A bond issued by the UK government.

Growth (investment style) Growth investing is an investment style and strategy that is focused on investing in growth stocks—that is, companies whose earnings are expected to increase at an above-average rate compared to their industry sector or the overall market.

Inflation A measure of the increase in prices of goods and services over time.

Investment Association (IA) sector As published by the Investment Association, the IA sectors divide the funds universe to reflect the asset type, industry sector, or geographic regions funds are invested in. There are over 35 IA sectors. These are there to help anyone navigate the large universe of funds in the UK and include some offshore (EU) funds. The sectors divide up the funds into smaller groups, to allow you to make like-for-like comparisons between funds in one or more sectors, for instance to look at performance and fund charges.

KIID (Key Investor Information Document) A document that summarises a fund’s investment objective and investment policy, key risks, ongoing charges figure (see OCF) and past performance so that it is easy to compare features across different funds. It is required by EU law.

LIBID (London Interbank Bid Rate) The average interest rate at which financial institutions in the UK pay for depositing eurocurrency.

Liquidity If it is quick and easy to convert an asset into cash (i.e. to sell it), then it is referred to as a “liquid asset”. If an asset is “illiquid”, it takes a longer time to sell.

MSCI (Morgan Stanley Capital International) An investment research firm that provides stock indices, portfolio risk and performance analytics, and government tools.

MSCI (Mid-Small Capitalization Index) A stock index provided by MSCI that tracks the average performance of companies that cover market capitalisation from $1 to $10 billion.

Multi-Asset An investment which contains a combination of asset classes, creating a group or portfolio of assets.

Nominal A value which has not been adjusted for inflation.

OCF (ongoing charges figure) The OCF is made up of the annual management charge (AMC), the administration charge and other operating costs such as the fees that the fund pays to the trustee (or depositary), custodian, auditor and regulator.

Overweight When a portfolio manager decides to allocate a higher-than-normal percentage of a fund to a particular asset or asset class.

Peer group A group of funds that may be compared with one another, often for performance purposes. A peer group will usually be based on the funds’ investment scope, for example, US equity funds.

Quantitative analysis Quantitative is often better understood as “numerical”. Typically, it is the use of numbers (or complex mathematical and statistical modelling methods) to make sense of an investment. This is compared to qualitative analysis, which is about using subjective judgment and information that cannot be represented by numbers (such as a company’s culture) to evaluate an investment.

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Quantitative Easing (QE) Quantitative Easing (QE) is a tool central banks can use to stimulate an economy by increasing the supply of money. Technically, it involves the central bank printing new money and using this to buy assets from the financial market. This results in more money being in circulation, higher asset prices and lower interest rates (prices and interest rates tend to move in the opposite direction). This combination makes it more attractive for people to invest, borrow and spend more, driving economic growth. This technique has, in recent years, been used by the European Central Bank, the US Federal Reserve and the Bank of England.

Real return A value which has been adjusted for inflation.

RPI (Retail Price Index) Please also see the entry for inflation.

The Retail Price Index (RPI) measures how much prices of consumer goods and services change over a period of time. RPI is a measure of inflation and takes the exact same premise as CPI; however, it also includes housing costs. RPI has been deemed an inferior measure to CPI.

Russell 2000 A stock market index that tracks the 2000 smallest listed US stocks by market capitalisation.

Schroder Investment Management (Schroders) Schroders is a global investment manager. It actively manages investments for a wide range of institutions and individuals, to help them meet their financial goals.

Share class Share classes are a way to differentiate between different types of shares. For companies, this may mean that some shares have voting rights while others do not. Within a fund, the different share classes may represent different ways of paying the investor the income from the fund, different fees and expenses or different base currencies. For example, a fund will often have an “accumulation” share class and an “income” share class. With the former, any income produced will be automatically reinvested back into the fund (more shares will be bought in the fund). With the income share class, income can either be received as a regular payment or reinvested.

Short duration A strategy where an investor is focused on bonds with a small amount of time to maturity. Specifically for this report, where we did hold fixed income assets, we were positioned with a low sensitivity to changes in interest rates (thus short duration).

SONIA (Sterling Overnight Index Average) The interest rate paid by financial institutions during periods when the markets are closed.

S&P 500 A stock market index that tracks the average performance of the top 500 listed US companies.

SustainEx The Schroders in-house research tool which is designed to quantify the positive contributions and negative impacts companies have on society. By examining both current profits and potential externalities through a common monetary lens, SustainEx aligns social and environmental impact with investment risk.

Top down An investment strategy, whereby an investor looks at macroeconomic variables such as GDP and CPI to determine investment decisions.

Total return The total return of an investment is the combination of any capital appreciation (or depreciation) plus any income from interest or dividends. It is measured over a set period, and is given as a percentage of the value of the investment at the start of that period.

Underweight When a portfolio manager decides to allocate a lower-than-normal percentage of a fund to a particular asset or asset class.

Unit class Please refer to the share class definition.

Unit trust A type of fund which is structured as a trust. It is split up into equal portions called “units” which belong to the unitholder. The money paid for the units goes into a pool with other investors’ money which an investment manager uses to buy financial instruments on behalf of the unitholders, with the aim of generating a return for them.

Value (investment style) Value investing is a style of investing that involves buying securities that appear undervalued in the belief that, over time, the asset’s relatively low price will rise to more accurately reflect the intrinsic value of the business.

Volatility Volatility measures the fluctuations in a security’s price. For example, a highly volatile share experiences greater changes in price than other investments. High volatility is taken as an indication of higher risk.

Yield A measure of the income return earned on an investment. In the case of a share, the yield is the annual dividend payment expressed as a percentage of the market price of the share. For property, it is the rental income as a percentage of the capital value. For bonds, the yield is the annual interest as a percentage of the current market price.

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Important information: This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. Reliance should not be placed on the views and information in the document when taking individual

investment and/or strategic decisions. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. Schroders has expressed its own views in this document and these may change. Issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU, which is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored. CS2654

Schroder Unit Trust Limited1 London Wall Place, London EC2Y 5AU, United KingdomT +44 (0) 20 7658 6000

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