commodities and strategies - schroders · the schroders commodities team has been managing...

Commodities and

Strategies October 2016

October 2016 | For professional investors or advisors only

Christopher Wyke | Product Director

Source: Schroders – September 2016

Why invest in Commodities?

1

As an inflation risk hedge

As a geopolitical risk hedge

As a portfolio diversifier

Commodities are cheap

Commodities are underowned

Commodity markets are inefficient

Why invest in Commodities? As an inflation hedge

Source Thomson DataStream; Schroders – 31 December 2015

2

Monetary Madness “The Great

Inflation II”

?

0

10

20

30

40

50

60

70

80

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020

World Money Supply

M2 ($trn)

Volcker

claws it

back

Dollar

devalued

again

Fed acts

Dollar rises

Dollar

falls

“Pure” Fiat

Money Begins

Bernanke

“Helicopter”

speech

Dollar rose again

“The Great

Inflation”

Dollar declining?

Why invest in Commodities? The Great Inflation I: A Reminder

3

Shown for illustrative purposes only.

7,70%

10,60%

-13,50%

12,50%

7,30%

4,60% 5,30% 6,30%

21,30%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Stocks Bonds Commodities Stocks Bonds Commodities Stocks Bonds Commodities

Why invest in Commodities? Diversified source of return in inflationary environments

4

Source: US CPI 1976 – 2015: Annual Returns; S&P; Barclays; CRB – Bloomberg

Falling inflation Stable inflation Rising inflation

5

Source: Hedgeye – September 2016

Be careful what you wish for…

Why invest in Commodities? As a geopolitical hedge

6

Source: Google images

Why invest in Commodities?

7

Source: Bloomberg; Schroders – 30 September 2016

0

200

400

600

800

1.000

1.200

1.400

1.600

set/85 set/87 set/89 set/91 set/93 set/95 set/97 set/99 set/01 set/03 set/05 set/07 set/09 set/11 set/13 set/15

Commodities are uncorrelated

S&P GSCI TR Index relative to S&P 500 (rebased to 100)

S&P 500 Index

S&P GSCI TR Index

0

5

10

15

20

25

30

35

40

Nov-05 Nov-07 Nov-09 Nov-11 Nov-13 Nov-15

Source: Schroders; Bloomberg – 30 September 2016

Why invest in Commodities? Commodities are cheap

8

0

10

20

30

40

50

60


0

2

4

6

8

10

12

14

16


Natural Gas

Silver

Rubber

Sugar

0

100

200

300

400

500

600


-82%

-79%

-72% -72%

s/b

tu

¥/K

ilo

$/o

z

Cts

/lbs

Why invest in Commodities now?

9

Source: Merrill Lynch Survey; JP Morgan Flow & Liquidity –September 2016

Sentiment: Commodities are still unloved

Monthly net over/underweight in Commodities

%

Gold equities analyst buy recommendations

15%

25%

35%

45%

55%

65%

75%

85%

0

100

200

300

400

500

600

700

2000 2002 2004 2006 2008 2010 2012 2014 2016

HUI Index (LHS)

Buy % (RHS)

Index Total Number Buys / Total Recommendations

Schroders’ Commodity Funds Commodity fund ‘family’ 2016

10

Source: Schroders, October 2016

* converted from SAS Gold & Precious Metals Fund 30.06.16

Launch date Vehicles Performance

Objective Assets Style

2005 Part II SICAV, US LP Index plus Mainly futures Long only,

unconstrained

2006 Part II SICAV Index plus Mainly futures Long only,

unconstrained

2006 UCITS SICAV Index plus Equities

Long only,

unconstrained,

high beta

2011/16 UCITS SICAV Index plus Equities Long only,

unconstrained

2013 UCITS SICAV Real Return

Cash, Bonds,

Equities,

Commodities

Long only, diversified

2016 Part II SICAV Total Return Futures, Equities,

Options

Long / short,

leverage

Fund

Commodity

Agriculture

Global Energy

Global Gold*

Wealth

Preservation

Commodity

Total Return

Schroders Commodity Fund

Commitment

The Schroders commodities team has been managing long-only, actively managed commodity futures portfolios

since October 2005 and now manages over $2 billion in commodities for clients around the world. Schroders

remains highly committed to this asset class and has significantly increased the size and experience of its

commodities team in the last 2 years.

Philosophy

Schroders believes that over a market cycle, an actively-managed commodities portfolio will produce higher returns

at a lower level of volatility than a passively managed portfolio

Approach

Active management

Index unconstrained

Long only, no leverage

Performance Objective

Aims to outperform simple average of the four major commodity indices* with a lower level of volatility

Source: Schroders – September 2016 *The 4 indices are: S&P GSCI TR, TR/J CRB, BCOM TR, RICI TR

Fundamental research driven

Equal emphasis on agriculture, energy and metals

Medium term time horizon

11

Calendar Years Trailing Periods

2011 2012 2013 2014 2015 2016

YTD 1 Yr 2 Yr 3 Yr 5 Yr

Since

inception

31.10.05

Schroders Commodities Composite* -6.36 0.34 -8.21 -23.58 -27.27 +14.44 0.47 -18.24 -14.49 -10.4 -0.84

4-Index Benchmark^ -7.46 -0.51 -5.06 -22.74 -26.76 +7.41 -5.33 -19.91 -15.62 -9.79 -5.22

Outperformance vs. Benchmark 1.10 0.85 -3.15 -0.84 -0.51 +7.03 5.80 1.67 1.13 -0.25 4.38

-10

-8

-6

-4

-2

0

2

15 17 19 21 23 25

Schroders Commodities Strategy Performance

*Composite Gross Returns **Annualised Standard Deviation of monthly returns ^Benchmark: simple average of BCOM, Rogers ICI, S&P GSCI, TR/J CRB

Source: Schroders – 30 September 2016

Performance of Commodities Strategy vs. Indices

Cumulative total return % Annualized rate of return %

-80

-60

-40

-20

0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 **Volatility %

Schroders* Rogers ICI

BCOM TR/J CRB

S&P GSCI

Schroders*

Rogers ICI

BCOM TR/J CRB

Average

S&P GSCI Average

Bloomberg Commodity TR Index -13.32 -1.05 -9.52 -17.01 -24.66 +8.87 -2.58 -15.08 -12.34 -9.37 -4.87

Outperformance vs. BCOMTR Index 6.96 1.39 1.31 -6.57 -2.61 +5.57 3.05 -3.15 -2.15 -0.67 4.04

12

75

80

85

90

95

100

105

110

out/15 nov/15 dez/15 jan/16 fev/16 mar/16 abr/16 mai/16 jun/16 jul/16 ago/16 set/16 out/16

Recent investment performance

13

Schroder AS^ Commodity

I Gross

Average*

Source: Bloomberg – 30 September 2016

1 Year Total Returns *The 4 indices are: S&P GSCI TR, TR/J CRB, BCOM TR, RICI TR ^Schroder Alternative Solutions is referred to as Schroder AS

1,17%

24,56%

17,53%

14,65%

-1,95%

18,65%

0,01%

7,36%

-5%

5%

15%

25%

Schroder ISF** GlobalGold

SISF Global Energy SISF WealthPreservation

Schroder AS CommodityFund

SAS Agriculture Fund

Schroders’ Commodity Funds 2016 Performance to 30th September

14

Source: Schroders; Bloomberg – 30 September 2016, gross returns **Schroder International Selection Fund is referred to as Schroder ISF throughout this presentation.

*Schroder AS Gold and Precious Metals Fund up to 28 June 2016 – now the SISF Global Gold as of 29 June 2016

19/10/

2016

18:05:

14

Benchmark

Fund

*

FTSE Gold Mines MSCI World Energy

Sector Index Eurozone CPI 4-Index Benchmark Rogers Agriculture TR

Index

Oats

Lean H

ogs

Fe

ed

er

Ca

ttle

Rough R

ice

Kansas W

heat

Wheat

Liv

e C

attle

Fre

nch W

heat

Cocoa

Corn

Gasolin

e

Natu

ral G

as

Canola

WT

I

UK

Nat

Gas

Copper

Soybean O

il

Rapeseed

Cotton

Alu

min

ium

Soybeans

Coffee

Soybean M

eal

Pla

tinum

Palm

Oil

Le

ad

Ru

bb

er

Gas O

il

Nic

kel

Bre

nt

Heating O

il

Gold

Lu

mb

er

Palla

diu

m

Silv

er

Tin

Ora

nge J

uic

e

Suga

r

Zin

c

Coal

Iron O

re

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

2016 Market Review Commodity Returns (YTD to 30th September 2016)

15

Source: Bloomberg – 30 September 2016

Total Returns

% Total Return

Average Commodity Index Return

Current Investment Strategy Summary

16

Source: Schroders – September 2016

► Commodities made a major turn early in 2016

– 5-year bear market is over

– supply-demand dynamics in high gear

– unwarranted extreme monetary policy supportive

► Energy:

– Oil bottomed in February, now consolidating near $50, trend is higher

– US natural gas heading for a shortage; price surge to continue

► Metals: gold, silver favoured but base metals can also rally

► Agriculture:

– We like coffee, sugar, rubber, lumber

– Crop losses in South America in Q2 removed the oversupply in corn and

soybeans. Prices are bottoming.

Schroder AS Commodity Fund As at 30 September 2016

4,6

3,1

-2,8

-4,9

Cash

Agriculture

Metals

Energy

Sector weights vs. benchmark^

Energy

38.8%

Metals

20.4%

Agriculture

36.3%

Cash

4.6%

Agriculture

36.3% Energy

38.8%

Metals

20.4%

17

Futures Equities ETF’s* Total Exposure Benchmark† Difference

Cash

4.6%

Crude Oil 14.0 2.2 16.2 27.8 -11.6

Gas Oil 1.7 1.7 1.6 0.1

Gasoline 4.4 4.4 4.2 0.2

Heating Oil 3.4 3.4 4.1 -0.6

UK Natural Gas 1.6 1.6 1.6

US Natural Gas 9.3 2.1 11.4 5.9 5.5

Aluminium 1.1 1.1 4.4 -3.3

Copper 4.2 4.2 5.1 -0.9

Gold 3.4 0.8 1.7 5.9 6.7 -0.8

Lead 0.7 0.7 0.7

Nickel 2.4 2.4 1.3 1.1

Palladium 0.1 -0.1

Platinum 1.0 0.1 1.1 0.5 0.7

Silver 3.0 0.3 3.3 2.6 0.7

Tin 0.3 -0.3

Zinc 1.6 1.6 1.6

Cocoa 1.6 -1.6

Coffee (Robusta) 2.4 2.4 0.5 1.9

Coffee (Arabica) 4.3 4.3 2.1 2.1

Corn 4.7 4.7 5.3 -0.6

Cotton 5.6 5.6 3.0 2.5

Feeder Cattle 0.3 -0.3

Lean Hogs 0.3 0.3 1.2 -0.9

Live Cattle 3.6 3.6 3.5 0.1

Lumber 0.2 0.4 0.7 0.3 0.4

Oats 0.1 -0.1

Orange Juice 0.4 -0.4

Rapeseed 0.3 -0.3

Rough Rice 0.2 -0.2

Rubber 1.8 1.8 0.3 1.5

Soybean Meal 0.9 -0.9

Soybean Oil 1.5 1.5 1.2 0.3

Soybeans 3.0 3.0 4.6 -1.6

Sugar (Raw) 4.5 4.5 3.5 1.0

Sugar (Refined) 1.0 1.0 0.3 0.7

Wheat (US) 2.1 2.1 3.5 -1.5

Wheat (French) 1.0 1.0 0.3 0.7

Cash 4.6

TOTAL 87.8 5.9 1.7 100.0 100.0

Source: Schroders *Includes OTC Commodity Swaps and Physically Backed ETFs †Shown for comparison purposes only ^S&P GSCI TR; TR/J CRB; BCOM TR; RICI TR

Global: Fundamentals Strong Dollar has been a big negative for Commodities – now reversing?

18


80

85

90

95

100

105

110

115

-

100

200

300

400

500

600

700

dez/99 dez/01 dez/03 dez/05 dez/07 dez/09 dez/11 dez/13 dez/15

US$ TWI (RHS)

Gold

Oil

ᴖ ᴖ ᴖ

S S H

ᴖ ᴖ ᴖ

?

?

?

ᴖ ᴖ ᴖ

?

Energy Fundamentals: Oil Market tightening rapidly in H2 2016

IEA 2016

mnbd

Δ

Global demand 96.1 1.4

OECD demand 46.3 0.1

Non-OECD demand 49.7 1.2

Non-OPEC supply 56.8 -0.8

Non-OPEC ex-NA 37.5 -0.3

North America 19.5 -0.5

OPEC NGL 6.9 0.2

Non-OPEC + NGL 63.7 -0.6

OPEC to balance 32.4 +2.0

OPEC 2016

mnbd

Δ







OPEC NGL 6.3 0.2



US DoE 2016

mnbd

Δ





Non-OPEC ex-NA 35.4 0.0


OPEC NGL 6.8 0.3



Energy Aspect 2016

mnbd

Δ







OPEC NGL 6.8 0.1



Balances much healthier in 2016, progressive tightening through H2

Iran and Libya remain principal wildcards for 2016

19

Source: Schroders, as at 04 July 2016. Subject to rounding errors

Energy Fundamentals: Oil Market tightening continues into 2017

US DoE 2017

mnbd

Δ






North America 21.7 0.1

OPEC NGL 7.2 0.3

Non-OPEC + NGL 64.0 0.1


IEA 2017

mnbd

Δ




Non-OPEC supply 57.0 0.2



OPEC NGL 6.9 0.0

Non-OPEC + NGL 63.9 0.2


Energy Aspect 2017

mnbd

Δ


OECD demand 45.9 -0.3





OPEC NGL 6.9 0.1



Tightening continues into 2017 on falling non-OPEC supply, CONSENSUS TOO HIGH

2017 demand is main wildcard at this stage

20

Source: Schroders, as at 04 July 2016. Subject to rounding errors

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

jan-2

013

fev-2

013

mar-

2013

mai-2013

jun-2

013

ago-2

013

set-

20

13

out-

2013

dez-2

013

jan-2

014

fev-2

014

abr-

20

14

mai-2014

jul-20

14

ago-2

014

set-

20

14

nov-2

014

dez-2

014

jan-2

015

mar-

2015

abr-

20

15

jun-2

015

jul-20

15

ago-2

015

out-

2015

nov-2

015

jan-2

016

fev-2

016

mar-

2016

mai-2016

jun-2

016

USA gasoline demand 4 week MA % US Highways Vehicle Miles Travelled

Energy Fundamentals: Oil USA Gasoline demand – what has happened recently?

21

Source: Schroders, EIA, US Department of Transport – July 2016

2.800.000

2.825.000

2.850.000

2.875.000

2.900.000

2.925.000

2.950.000

2.975.000

3.000.000

3.025.000

3.050.000

3.075.000

3.100.000

3.125.000

3.150.000

3.175.000

3.200.000

Jan-0

6Apr-

06

Jul-06

Oct

-06

Jan-0

7Apr-

07

Jul-07

Oct

-07

Jan-0

8Apr-

08

Jul-08

Oct

-08

Jan-0

9Apr-

09

Jul-09

Oct

-09

Jan-1

0Apr-

10

Jul-10

Oct

-10

Jan-1

1Apr-

11

Jul-11

Oct

-11

Jan-1

2Apr-

12

Jul-12

Oct

-12

Jan-1

3Apr-

13

Jul-13

Oct

-13

Jan-1

4Apr-

14

Jul-14

Oct

-14

Jan-1

5Apr-

15

Jul-15

Oct

-15

Jan-1

6Apr-

16

(Rolling 12-month average, million miles)

3.000

4.000

5.000

6.000

7.000

8.000

9.000

10.000

11.000

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

2008

2009

2010

2011

2012

2013

2014

2015E

2016E

2017E

2018E

2019E

2020E

Gasoline Consumption Diesel Consumption

Kerosene, Fuel Oil & Other Domestic crude production

Net Imports (RHS)

China oil demand by product (kbls/day) China passenger car sales (Monthly, Bloomberg)

Energy Fundamentals: Oil China demand driven by gasoline consumption

22

Source: Energy Aspects, Sinopec, Bloomberg, Schroders July 2016

Based on a run rate of 20m new passenger car sales per year, this translates into around 280k/day of incremental gasoline demand

China’s gasoline demand was up 11% y-o-y for the full year 2015. Oil demand was up around 3.5% y-o-y for the full year 2015

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000000

2200000

2400000

01

/01/2

006

01

/07/2

006

01

/01/2

007

01

/07/2

007

01

/01/2

008

01

/07/2

008

01

/01/2

009

01

/07/2

009

01

/01/2

010

01

/07/2

010

01

/01/2

011

01

/07/2

011

01

/01/2

012

01

/07/2

012

01

/01/2

013

01

/07/2

013

01

/01/2

014

01

/07/2

014

01

/01/2

015

01

/07/2

015

01

/01/2

016

All Cars SUV Pure Electric Hybrids

Energy Fundamentals: Oil

23

Source: Indian Ministry of Petroleum & Natural Gas – 31 March 2016

India is the new China

6.000

8.000

10.000

12.000

14.000

16.000

18.000

200

1

200

2

200

2

200

3

200

4

200

5

200

5

200

6

200

7

200

8

200

8

200

9

201

0

201

1

201

1

201

2

201

3

201

4

201

4

201

5

201

6

1000 m

etr

ic t

onnes

-10%

-5%

0%

5%

10%

15%

20%

200

3

200

3

200

4

200

4

200

5

200

6

200

6

200

7

200

7

200

8

200

8

200

9

201

0

201

0

201

1

201

1

201

2

201

3

201

3

201

4

201

4

201

5

201

5

6m ann.

12m ann.

India Oil demand is soaring India total petroleum products consumption –

annualised rates of change

Baker Hughes International Rig-Count

Energy Fundamentals: Oil Supply: the cuts in international drilling activity have started to accelerate

The European rig count has fallen 35% in the last 15 months and is expected to contract by a further 40% before the end of 2016

The South American rig count is down 50% from its peak at the end of 2013. Both Petrobras and Pemex are reducing rig commitments further for 2016/2017

The Africa rig count down 36% since the end of 2014. The major oil companies are still trying to break contracts for future drilling commitments

The Middle East rig count is only down 8% from its peak. This is consistent with the key producers intentions of maintaining production at current levels

24

Source: Baker Hughes, Schroders, July 2016

Estimated 2015

Oil Production

(MBD)

Current

Rig Count

Recent

Peak

%

Change

Angola 1.76 9 19 -53%

Argentina 0.63 71 113 -37%

Brazil 2.53 15 50 -70%

China 4.33 31 40 -23%

Colombia 1.01 5 48 -90%

Egypt 0.70 28 56 -50%

Indonesia 0.69 19 40 -53%

Iraq 3.99 43 96 -55%

Malaysia 0.71 6 16 -63%

Mexico 2.60 22 98 -78%

Nigeria 1.80 6 19 -68%

UK 0.95 9 20 -55%

Total 21.70

40

50

60

70

80

90

100

110

120

130

140

jan/1

3

mar/

13

mai/13

jul/13

set/

13

nov/1

3

jan/1

4

mar/

14

mai/14

jul/14

set/

14

nov/1

4

jan/1

5

mar/

15

mai/15

jul/15

set/

15

nov/1

5

jan/1

6

mar/

16

mai/16

BH SOUTH AMERICA BH EUROPE BH AFRICA

BH MIDDLE EAST BH FAR EAST

The majority of OPEC spare capacity (~ 3mb/day) sits with Libya, Nigeria, Venezuela, Iran and Saudi Arabia.

Around 40% of this capacity sits in extremely unstable countries (Nigeria, Venezuela and Libya)

Selected oil producing countries (kb/day) OPEC oil production (kb/day)

Energy Fundamentals: Oil Supply: declines are starting to accelerate in some regions

25

Source: Energy Intelligence & OPEC, July 2016

1250

1500

1750

2000

2250

2500

2750

Angola Nigeria Mexico Venezuela Brazil

26000

27000

28000

29000

30000

31000

32000

33000

34000

01/1

2/2

004

01/0

8/2

005

01/0

4/2

006

01/1

2/2

006

01/0

8/2

007

01/0

4/2

008

01/1

2/2

008

01/0

8/2

009

01/0

4/2

010

01/1

2/2

010

01/0

8/2

011

01/0

4/2

012

01/1

2/2

012

01/0

8/2

013

01/0

4/2

014

01/1

2/2

014

01/0

8/2

015

01/0

4/2

016

OPEC Production (kb/day)

The 80% cut in US oil directed drilling activity is much steeper than the 46% cut in 2009

US shale plays generate negative returns at current prices, there will be no increase in activity until pricing improves

Lowest rig count in Canada since 1992

Baker Hughes US Oil Rig-Count Baker Hughes Canada Rig-Count

Energy Fundamentals: Oil Supply: North American cut in drilling activity has exceeded expectations

26

Source: Baker Hughes, Schroders, July 2016

200

300

400

500

600

700

800

900

1.000

1.100

1.200

1.300

1.400

1.500

1.600

1.700

1 3 5 7 911

13

15

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

2011 2012 2013 2014 2015 2016

0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

1 3 5 7 9

11

13

15

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

2011 2012 2013 2014 2015 2016

US core regional shale oil production (barrels/day)

Energy Fundamentals: Oil Supply: US oil production will continue declining into 2017

Analysing the EIA well production data

and assuming the rig count stays flat at

current levels, we expect production

from these core shale regions to decline

in 2016

Based on our conversations with

management teams, we believe that

companies are currently drilling their

best wells to maximise production per

rig. This will result in productivity per rig

declining as drilling activity

picks up

The monthly decline rate from these four

regions is 6%. This has increased from

3% since 2010 and we expect it to

continue increasing over time

US oil production levels are already

down 1M bpd from the peak in April

2015. At current activity levels, Core

Labs projects US crude oil production

onshore to fall a further 700 - 800k bpd

in 2016/2017.

27

Source: EIA, Schroders July 2016

-

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

4.500.000

5.000.000

5.500.000

6.000.000

Jan-1

1

May-1

1

Sep-1

1

Jan-1

2

May-1

2

Sep-1

2

Jan-1

3

May-1

3

Sep-1

3

Jan-1

4

May-1

4

Sep-1

4

Jan-1

5

May-1

5

Sep-1

5

Jan-1

6

May-1

6

Sep-1

6

Jan-1

7

May-1

7

Sep-1

7Bakken (bl/day) Eagle Ford (bl/day) Permian (bl/day) Niobrara (bl/day)

Global Oil Market Quarterly Stockbuild (mn bls/day)

Energy Fundamentals: Oil Supply: global inventories are starting to fall

28

Source: Schroders (forecast), Energy Aspects (actual)

-2,00

-1,50

-1,00

-0,50

0,00

0,50

1,00

1,50

2,00

Q1-15a Q2-15a Q3-15a Q4-15a Q1-16f Q2-16f Q3-16f Q4-16f

0

1

2

3

4

5

6

7

55

57

59

61

63

65

67

69

71

73

75

jul/10 jan/11 jul/11 jan/12 jul/12 jan/13 jul/13 jan/14 jul/14 jan/15 jul/15 jan/16 jul/16 jan/17

29


US Natural Gas Supply – Price Matters

BCF/D

Energy Fundamentals

$/mmtbu

US Gas Production - LHS

Price - RHS

0%

10%

20%

30%

40%

50%

60%

200

1-0

1-0

1

200

1-0

7-0

1

200

2-0

1-0

1

200

2-0

7-0

1

200

3-0

1-0

1

200

3-0

7-0

1

200

4-0

1-0

1

200

4-0

7-0

1

200

5-0

1-0

1

200

5-0

7-0

1

200

6-0

1-0

1

200

6-0

7-0

1

200

7-0

1-0

1

200

7-0

7-0

1

200

8-0

1-0

1

200

8-0

7-0

1

200

9-0

1-0

1

200

9-0

7-0

1

201

0-0

1-0

1

201

0-0

7-0

1

201

1-0

1-0

1

201

1-0

7-0

1

201

2-0

1-0

1

201

2-0

7-0

1

201

3-0

1-0

1

201

3-0

7-0

1

201

4-0

1-0

1

201

4-0

7-0

1

201

5-0

1-0

1

201

5-0

7-0

1

201

6-0

1-0

1

Coal Nat Gas Nuclear Renewables

Energy Fundamentals: US Natural Gas

30

Source: U.S. Energy Information Administration, Monthly Energy Review, Short-Term Energy Outlook – July 2016

US Natural Gas consumption rising steadily led by power (CCGT) demand

Share of total U.S. electricity generation by source • EPA mercury limits are still

encouraging power

producers to switch away

from coal fired generation.

• Coal fired generating

capacity in the US has

dropped from 320 GW in

2008 to 276 GW in May

2016. A further 2 – 5 GW of

capacity is expected to be

retired by the end of 2016.

• 21 – 28 GW of new CCGT

capacity is coming online

between 2016 and 2020.

This equates to an

incremental 2.5 – 3.4Bcf/day

of new gas demand (CCGT

gas demand = 27Bcf/day in

2016).

Energy Fundamentals: US Natural Gas Mexico needs US gas volumes. Export capacity is increasing in 2016/2017

31

Source: PEMEX Schroders - July 2016

US gas exports to Mexico

1.500

1.700

1.900

2.100

2.300

2.500

2.700

4.000

4.500

5.000

5.500

6.000

6.500

7.000 Mexico Gas Output

LHS

Mexico Oil Production

RHS

Oil and gas output - Mexico

2,5

3,0

3,5

4,0

4,5

5,0

Pipeline expansion

Bcf/day

• Pemex expect oil and gas production to fall around 5 – 8% in 2016. 2016 capital expenditure has been cut 60%

from 2014 levels and we think that this is likely to result in an acceleration in declines in 2017.

Kb/d

ay

Mcf/

day

Metals Fundamentals: Aluminium A wall of planned new Chinese supply remains

32

Source: NBS, Bloomberg, Schroders – July 2016

Table of major Chinese aluminium smelting projects

Smelter Location 2015 2016e 2017e 2016e 2017e

Guangxi Suyuan Guangxi - - 126 - 126

Baise Mining Guangxi - 114 180 114 66

Guizhou Qingzheng Guizhou - - 145 - 145

Baotou I.Mongolia 535 549 675 13 126

Jinlian I.Mongolia 502 833 1100 332 267

Zhaqi I.Mongolia 361 359 500 (2) 141

Liaoning Yinkou Liaoning 263 400 500 137 100

Qinghai Xinheng Hydro Qinghai 215 178 250 (37) 72

Shaanxi Meixin Shaanxi - - 125 - 125

Xinyuan Shandong 470 966 1240 496 274

Zouping Shandong 2571 2736 3000 165 264

Binzhou Shandong 384 746 960 362 214

Yangxin Shandong 439 580 616 141 36

Beihai Shandong 394 583 660 189 77

Xinjiang Xinfa Xinjiang 1686 1895 1900 210 5

Xinjiang East Hope Xinjiang 899 966 1208 67 242

Xinjiang Tianlong Xinjiang 178 203 250 25 47

Xinjiang Shenhuo Xinjiang 799 798 900 (1) 102

Xinjiang Tianshan Xinjiang 1017 1141 1466 125 325

Xinjiang Qiya Xinjiang 764 874 900 109 26

Selected Aggregate Increase (CRU) 2,443 2,781

Total Chinese Production (Mt) 31.2 32.1 34.7

Grow th % 3% 8%

Grow th (Mt) 0.90 2.60

Production share of global % 54% 55% 57%

Change (Kt)Production Volume (Kt)

Metals Fundamentals: Copper Expect pressure on 2H Chinese net imports - bearish

33

Source: NBS ,Schroders – July 2016

China refined copper imports and exports China net refined copper imports (Kt)

0

50

100

150

200

250

300

350

400

450

500

ago/99 ago/01 ago/03 ago/05 ago/07 ago/09 ago/11 ago/13 ago/15

Kt

Imports

Exports

553 784

1.104

1.293 1.139 1.082

585

1.375 1.362

3.112

2.882

2.676

3.131

2.916

3.325 3.468

3.859

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016 Y

TD

…

Metals Fundamentals: Tin Tin stocks are approaching critical low levels

34

LME tin prices (US$/t) vs. LME tin stocks (Kt)

Source: Bloomberg, Schroders – September 2016

2.000-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Metals Fundamentals: Nickel Most producers are loss-making

35

Source: NBS, Bloomberg, Schroders – 31 August 2016

$/T

onne

Nickel 90th centile cost of

production - LHS

Price - RHS

60,000

30,000

20,000

10,000

Log Scale

Metals Fundamentals: Gold Real interest rates are a primary driver of gold prices

36

Source: Bloomberg, Schroders – July 2016

Gold prices plotted against real 5 year TIPS (inverted)

-1

-0,8

-0,6

-0,4

-0,2

0

0,2

0,4

0,6

0,8

11.000

1.050

1.100

1.150

1.200

1.250

1.300

1.350

1.400

jan/14 abr/14 jul/14 out/14 jan/15 abr/15 jul/15 out/15 jan/16 abr/16 jul/16 out/16

TIP

S, %

, sc

ale

inve

rted

Go

ld U

SD/o

z

XAU Currency Index

Metals Fundamentals: Gold Opportunity cost, political, and geo-political risk perceptions are secondary drivers

37

Source: BofA Merril Lynch, politicalhumor.com, Schroders – July 2016

Negatively yielding global fixed income assets Populism

Metals Fundamentals: Gold Chinese investment demand has huge potential from a tiny base.

38

Source: Bloomberg, Schroders – July 2016

0,0%

0,1%

0,2%

0,3%

0,4%

0,5%

0,6%

0,7%

0,8%

0,9%

jul 13 dez 13 mai 14 out 14 mar 15 ago 15 jan 16 jun 16

0

100

200

300

400

500

600

jul 13 dez 13 mai 14 out 14 mar 15 ago 15 jan 16 jun 16

Huaan Yifu

Guota

Huaan Yifu

Guotai

Main Chinese Gold ETF Holdings (Koz) Main Chinese Gold ETF Holdings (% Global

Known Holdings)

Gold / S&P 500 Ratio

Metals Fundamentals: Gold Cheap vs. financial assets

39


0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

6,5

1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

Gold Expensive

Gold Cheap

Metals Fundamentals: Gold U.S. Federal Reserve rate hikes – historical context

40

Source: Bloomberg, Schroders - September 2015

Gold price performance around historical Federal

Reserve hiking cycles

DXY performance around historical Federal Reserve

hiking cycles

60

70

80

90

100

110

120

130

TT

+9

T+

18

T+

27

T+

36

T+

45

T+

54

T+

63

T+

72

T+

81

T+

90

T+

99

T+

10

8T

+1

17

T+

12

6T

+1

35

T+

14

4T

+1

53

T+

16

2T

+1

71

T+

18

0T

+1

89

T+

19

8T

+2

07

T+

21

6T

+2

25

T+

23

4T

+2

43

60

70

80

90

100

110

120

130

T

T+

10

T+

20

T+

30

T+

40

T+

50

T+

60

T+

70

T+

80

T+

90

T+

10

0

T+

11

0

T+

12

0

T+

13

0

T+

14

0

T+

15

0

T+

16

0

T+

17

0

T+

18

0

T+

19

0

T+

20

0

T+

21

0

T+

22

0

T+

23

0

T+

24

0

T+

25

0

1986

1994

1999

2004

1986

1994

1999

2004

800

1.000

1.200

1.400

1.600

1.800

2.000

jan

/11

jul/

11

jan

/12

jul/

12

jan

/13

jul/

13

jan

/14

jul/

14

jan

/15

jul/

15

jan

/16

jul/

16

-50

-40

-30

-20

-10

0

10

20

30

40

50

jan

/11

jun

/11

no

v/1

1

abr/

12

set/

12

fev/

13

jul/

13

dez

/13

mai

/14

ou

t/1

4

mar

/15

ago

/15

jan

/16

jun

/16

Metals Sentiment Analysis: Gold All indicators are bullish

41


Spot

Median Consensus

Forecast

Consensus Forecast Model Commitment of Traders Short Term Sentiment Indicator

-1,00000

-0,80000

-0,60000

-0,40000

-0,20000

0,00000

0,20000

0,40000

0,60000

jan

/11

jul/

11

jan

/12

jul/

12

jan

/13

jul/

13

jan

/14

jul/

14

jan

/15

jul/

15

jan

/16

jul/

16

Metals Chart analysis: Silver Momentum surge

42

Source: Updata; Bloomberg; Schroders – 4 October 2016

Agriculture:Supply risk A forgotten rising trend

43

Source: Schroders – 31May 2015, Munich Re, NOAA – National Centres for Environmental Information

World Natural Catastrophes 1980–

January 2015

Year ANOMALY

°C

2015 0.9

2014 0.74

2010 0.7

2013 0.66

2005 0.65

1998 0.63

2009 0.63

2012 0.62

2003 0.61

2006 0.61

Warmest periods of record:

1880–2015

25

45

65

85

105

125

145

165

185

205

225

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Agriculture: Fundamentals

44


Trouble on the farm

Corn

Wheat

Soybean

0

100

200

300

400

500

600

700

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

45

Source: USDA; Schroders – 12 September 2016

US Wheat: Nominal vs real prices

Index


Nominal

Real prices

Agriculture: Value Agriculture commodities vs US Farmland

46

Source : Bloomberg – Q1 2016

0

50

100

150

200

250

300

350

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US agriculture cropland

(national average)

Rogers Agriculture Total

Return Index

Base 100 as of 12/1997

0%

20%

40%

60%

80%

100%

120%

140%

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

100.000

1960/1961 1969/1970 1978/1979 1987/1988 1996/1997 2005/2006 2014/2015

Agriculture: Fundamentals Supply / Demand dynamics are bullish for sugar, rubber, coffee and oilseeds

47

Source: Schroders; USDA – Q2 2016 *Soybean, Rapeseed, Sunflower Seed, Peanut and Cottonseed

World sugar surplus / deficit

World coffee (Arabica & Robusta) ending stocks vs.

Stock-to-use ratio

World rubber surplus / deficit

World oilseeds* surplus / deficit

-800

-600

-400

-200

0

200

400

600

800

1.000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F

'000 tonnes

‘000 tonnes

Ending Stocks

Stock-to-use ratio

‘000 tonnes

‘000 Bags

-15.000

-10.000

-5.000

0

5.000

10.000

15.000

20.000

1959/1960 1969/1970 1979/1980 1989/1990 1999/2000 2009/2010

SURPLUS

DEFICIT

2015/2016

-2.9 mln tonnes

-25.000

-20.000

-15.000

-10.000

-5.000

0

5.000

10.000

15.000

20.000

25.000

1964/1965 1974/1975 1984/1985 1994/1995 2004/2005 2014/2015

SURPLUS

DEFICIT

0

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


48


Coffee, Sugar: New bull market

Sugar

Coffee

Appendix

People Investment team and resources

Source: Schroders as of September 2016

Geoff Blanning Head of Commodities

Implementation

Cash Management – Christopher Smith

– Katie Tutcher

– Lee Clapton

Product Management – Christopher Wyke

– Matthew Michael

– Nichola Bellini

– Eric Nelson (NY)

– Fiona Petrie

– Lucy Connolly

Economics Team Asia (2)

Latin America (2)

North America (1)

Europe (1)

Asia (2)

Australia (1)

North America (1)

ENERGY (4) METALS (5) AGRICULTURE (1) ECONOMICS (5)

EQUITY ANALYSTS

Risk Management Team

Chart and Sentiment Analysis

– Malcolm Melville

Quantitative Research

– Oscar Agra

James Luke

Energy

Geoff Blanning

Metals Agriculture

Rodolphe Roche

Simon Hodges

Equities

John Coyle

Trading Quant Analysis

Dravasp Jhabvala

Mark Lacey

50

Investment Process

Fundamental

Quantitative

Technical

Sentiment

Global Review Quarterly

Commodity Reviews Weekly

Limits

Buy Discipline

Stop-Loss

Policy

Asset Allocation

Decision-Making Risk

Management Research

Source: Schroders

51

Investment process Summary: Crude Oil

Fundamentals

Quantitative

Technical

Sentiment

Forecasts

Conclusions

Supply Demand

Commodity Quant

Model

Trend, Momentum

and Pattern

Consensus Forecasts

and Investor Positioning

12 month expected Return:

Investment Decision

Markets

52

Source: Schroders – September 2016. For illustrative purposes only

Investment process Summary: Scorecard

Source: Schroders

Sectors shown for illustrative purposes only

and should not be viewed as a

recommendation to buy/sell. The views and

opinions are those of the Schroder

Commodities team and may change.

53

Commodity Fundamentals Quantitative Charts Sentiment Overall Score Commodity

Bearish Neutral Bullish Bearish Neutral Bullish Bearish Neutral Bullish Bearish Neutral Bullish

10/10/2016 -2 0 2 -1 0 1 -1 0 1 -1 0 1 -5 -4 -3 -2 -1 0 1 2 3 4 5 10/10/2016

Energy EnergyBrent Neutral Neutral Bullish Bearish 0 0 Brent

WTI Neutral Neutral Bullish Neutral 1 1 Crude Oil

Gas Oil Neutral Neutral Bullish Bearish 0 0 Gas Oil

Gasoline Neutral Neutral Bullish Neutral 1 1 Gasoline

Heating Oil Neutral Neutral Bullish Neutral 1 1 Heating Oil

US Nat Gas Bullish Bullish Bullish Bullish 5 0 US Nat Gas

UK Nat Gas Bullish Bullish Bullish Bearish 3 0 UK Nat Gas

Coal Neutral Neutral Bullish Bullish 2 0 CoalBase Metals Base MetalsAluminium Bearish Bullish Neutral Bearish -2 0 Aluminium

Copper Bearish Neutral Neutral Neutral -2 0 Copper

Lead Neutral Neutral Bullish Bullish 2 2 Lead

Nickel Neutral Neutral Bullish Bearish 0 0 Nickel

Tin Neutral Bearish Bullish Bullish 1 0 Tin

Zinc Bullish Neutral Bullish Bullish 4 2 Zinc

Iron Ore Neutral Neutral Neutral Bullish 1 2 Iron OrePrecious Metals Precious MetalsGold Bullish Neutral Neutral Bullish 3 -1 Gold

Palladium Neutral Bearish Neutral Bullish 0 -1 Palladium

Platinum Bullish Neutral Neutral Neutral 2 1 Platinum

Silver Bullish Neutral Bearish Bullish 2 -2 SilverGrains GrainsCorn Neutral Neutral Neutral Bearish -1 1 Corn

Oats Neutral Neutral Bearish Bearish -2 0 Oats

Rough Rice Neutral Bearish Neutral Bearish -2 0 Rough Rice

US Wheat Neutral Neutral Bearish Bearish -2 0 US Wheat

FR Wheat Neutral Neutral Neutral Neutral 0 0 FR WheatOil Seeds Oil SeedsCanola Neutral Neutral Bearish Neutral -1 0 Canola

Palm Oil Neutral Bearish Bullish Neutral 0 0 Palm Oil

Rapeseed Neutral Neutral Bullish Neutral 1 0 Rapeseed

Soybean Meal Neutral Neutral Neutral Bearish -1 -1 Soybean Meal

Soybean Oil Neutral Neutral Bullish Bullish 2 0 Soybean Oil

Soybeans Neutral Bullish Neutral Bearish 0 0 SoybeansSofts SoftsCocoa Neutral Neutral Bearish Neutral -1 0 Cocoa

Coffee Bullish Neutral Bullish Bullish 4 0 Coffee

Orange Juice Neutral Neutral Neutral Neutral 0 -1 Orange Juice

Sugar Bullish Neutral Bullish Bullish 4 0 SugarLivestock LivestockFeeder Cattle Neutral Neutral Bearish Bearish -2 -1 Feeder Cattle

Lean Hogs Neutral Bearish Bearish Bearish -3 0 Lean Hogs

Live Cattle Neutral Neutral Bearish Neutral -1 0 Live CattleMaterials MaterialsCotton Bullish Neutral Neutral Bullish 3 0 Cotton

Lumber Bullish Bullish Bullish Bullish 5 1 Lumber

Rubber Bullish Neutral Bullish Neutral 3 0 RubberCommodity Equities Commodity EquitiesOil Equities Neutral Neutral Bullish Bullish 2 1 Oil Equities

N.Gas Equities Bullish Neutral Neutral Bullish 3 0 N.Gas Equities

Coal Equities Neutral Neutral Bullish Bullish 2 0 Coal Equities

B.Metals Equities Bearish Neutral Bullish Bullish 0 0 B.Metals Equities

P.Metals Equities Neutral Neutral Bearish Bullish 0 0 P.Metals Equities

Ags Equities Neutral Neutral Neutral Bullish 1 0 Ags Equities

Qtr

Ch

.

Portfolio construction Liquidity-based diversification and exposure limits

Source: Schroders as at September 2016

Please note that such limits are internal and may be subject to change without notice

RISK CONTROL COMMODITY LIMITS

Tier I (max 20%) Tier II (max 10%) Tier III (max 5%)

WTI Crude* Nickel Tin

Brent Crude* Zinc Lead

Gasoline Silver Lean Hogs

Heating Oil Corn Cocoa

Gas Oil Live Cattle Feeder Cattle

Natural Gas Wheat Palm Oil

Copper Coffee Platinum

Aluminium Cotton Rubber

Gold Soybeans Orange Juice

Soybean Oil Rice

Soybean Meal Ethanol

Sugar Canola

Oats

*Maximum exposure to crude oil = 30% ANY OTHER

TOTAL Tier I: 100% TOTAL Tier II: 50% TOTAL Tier III: 25%

RISK CONTROL DIVERSIFICATION RULES

Min Max

Sector

Energy 20% 60%

Agriculture 20% 60%

Metals 20% 60%

Commodity

Tier I 20%

Tier II 10%

Tier III 5%

Asset Type

Swaps/ETFs/Futures 50% 100%

Equities 0% 25%

Cash 0% 33%

54

Research and reporting Regular in-depth reporting and research

55

Source: Schroders - September 2016

Biweekly strategy updates

Quarterly investment outlook

In-depth commodity analysis

Flagship quant analysis

Bios

56

Geoff Blanning

Head of Commodities

Head of Commodities; Energy Fund Manager

Head of Emerging Markets Debt and Commodity Group since

December 1998, member of the Schroders Group Management

Committee

Geoff conceived and developed Schroders Commodity

businesses from 2003

Investment career commenced in 1985 at NM Rothschild

Rodolphe Roche

Head of Commodity Research and Agriculture

Joined Schroders in early 2005 as a Fund Manager /

Agriculture Analyst

Worked on the design of Schroder AS Agriculture Fund

Commodity career commenced in 2001 at Planteureux SA

(Agriculture Brokerage Co.) as a Commodity Analyst before

becoming Head of Research

James Luke

Fund Manager / Metals Analyst

Joined Schroders August 2014

Formerly Co Head of Metals Research at JP Morgan

Previously Metals Research Analyst at UBS, Sanford C

Bernstein and China International Capital Corporation

Investment career commenced in 2005 at Williams De Broe

Mark Lacey

Fund Manager / Equities Analyst

Co-manager of SISF Schroders Global Energy Fund

Joined Schroders in 2013

Formerly portfolio manager of Investec Global Energy funds.

Formerly Head of global energy at Goldman Sachs

In 2006 was ranked as #1 energy investment specialist in the

2006 Thompson Extel survey

Investment career commenced in 1996 at Credit Suisse Asset

Management

John Coyle

Fund Manager / Equities Analyst

Co-manager of SISF Schroders Global Energy Fund

Joined Schroders in early 2005 as a Fund Manager

In 2013, was voted #1 energy investor in Europe by companies

in the Thompson Extel Survey

In 2001 was voted number one energy analyst in Thompson

Extel

Investment career commenced in 1994 at AXA Investment

Managers

Source: Schroders

Bios

Oscar Agra, CFA

Quantitative Analyst

Investment career commenced in 2010 when he joined the EMD

and Commodities team

Simon Hodges

Head of Trading and Implementation, EMD and Commodities

Joined Schroders in 2000

Investment career commenced in 1995 at Prolific Asset

Management

Katie Tutcher

Fund Manager’s Assistant

Joined Schroders in 2014, investment career started in 2012

Malcolm Melville

Fund Manager and Chart and Sentiment Analyst

Fund manager for the Wealth Preservation fund

Joined Schroders in 2010 and is responsible for Chart Analysis

and Sentiment Analysis

Investment career commenced in 1997 at Norwich Union

Investment Management

57

Dravasp Jhabvala

Commodities Quantitative Analyst

Joined Schroders in June 2014 as a quantitative analyst for

Commodities

Investment career commenced in 2007 at Pictet Banque & Cie

Source: Schroders

Bios

58

Christopher Wyke

Product Director

Joined Schroders in 2000 and is responsible for the product

management of EMD and Commodities

Investment career commenced in 1981 when he joined

Rothschild Asset Management

Matthew Michael

Product Director

Joined Schroders in 2004 and is responsible for the product


Investment career commenced in 2000 at

The Royal Bank of Scotland

Nichola Bellini

Product Executive

Joined Schroders in 2006 and assists in the product

management of EMD and Commodities.

Investment career commenced in 2005 at Schroders

Fiona Petrie

Product Assistant

Joined Schroder’s in 2008 and assists in the product

management of EMD Commodities

Lucy Connolly

Product Assistant

Joined Schroder’s in 2010 and assists in the product


Source: Schroders

Schroder AS Commodity Fund Performance: October 2005 – September 2016

59

* USD I Shares Gross Daily NAV to NAV

**Inception 31 October 2005 ^ For performance comparison purposes only

Source: Schroders; TR/J CRB ; S&P Goldman Sachs; BCOM TR; Rogers ICI

USD % 2005** 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

YTD

Schroder AS Commodity Fund * 3.00 18.62 34.73 -35.29 34.03 15.36 -6.04 0.11 -7.78 -23.83 -28.10 14.70

Average of all four indices^ 3.04 -3.36 25.19 -39.65 20.57 15.63 -7.46 -0.51 -5.06 -22.74 -26.75 7.41

S&P Goldman Sachs CI TR -1.09 -15.09 32.67 -46.49 13.48 9.03 -1.18 0.07 -1.22 -33.06 -32.86 5.30

Thomson Reuters/Jefferies CRB TR Index 5.60 -2.85 22.15 -35.04 23.65 17.60 -8.21 -3.28 -4.97 -17.90 -23.30 6.01

Bloomberg Commodity TR Index 3.45 2.07 16.23 -35.65 18.91 16.83 -13.32 -1.05 -9.52 -17.01 -24.66 8.87

Rogers Int. Commodity TR 4.24 3.05 30.01 -41.35 26.23 19.01 -6.93 2.02 -4.49 -22.21 -26.08 9.25

USD %

Since Inception **

Cumulative Total

Return

Annual Rate

of Return Volatility

Sharpe

Ratio

Schroder AS Commodity Fund * -10.25 -0.99 18.31 -0.02

Average of all four indices ^ -44.28 -5.21 19.58 -0.23

S&P Goldman Sachs CI TR -65.89 -9.38 23.45 -0.33

Thomson Reuters/Jefferies CRB TR Index -33.39 -3.65 18.51 -0.17

Bloomberg Commodity TR Index -42.04 -4.87 17.82 -0.25

Rogers Int. Commodity TR -29.89 -3.20 19.92 -0.12

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

fev/06 nov/06 ago/07 mai/08 fev/09 nov/09 ago/10 mai/11 fev/12 nov/12 ago/13 mai/14 fev/15 nov/15 ago/16

Schroders Commodity Strategy Sector allocations

Source: Schroders – 30 September 2016

Energy Metals Agriculture Cash

60

Schroder AS Commodity Fund Performance attribution by commodity*

61

*Since inception: 31 October 2005 to 31 August 2016

Source: Schroders; Bloomberg

Commodity Commodity Commodity

SchrodersIndex

AverageDifference Schroders

Index

AverageDifference Schroders

Index

AverageDifference

Crude Oil -15.18 -26.59 11.41 Barley 0.15 -0.18 0.33 Chicken 0.02 0.00 0.02

Ethanol 0.17 0.00 0.17 Corn -0.05 -0.02 -0.03 Feeder Cattle 0.00 -0.31 0.31

Gasoline -2.45 -1.03 -1.43 Oat 0.09 -0.10 0.19 Live Hogs -0.20 -0.09 -0.12

Gas Oil 1.22 -2.72 3.95 Wheat -1.30 -2.40 1.10 Lean Hogs -1.96 -1.87 -0.09

Heating Oil -3.05 -3.19 0.14 Total Grains -1.28 -2.85 1.57 Live Cattle -0.66 -1.98 1.32

Natural Gas -14.48 -24.03 9.55 Canola 0.20 -0.07 0.27 Seafood -0.02 0.00 -0.02

Coal 0.05 0.00 0.05 Palm Oil 1.13 0.00 1.13 Total Livestock -2.81 -4.21 1.40

Uranium -0.36 0.00 -0.36 Soybean Meal 1.04 0.33 0.71 Cotton -1.36 0.23 -1.58

Alternative Energy 0.17 0.00 0.17 Soybean Oil -0.16 -0.02 -0.15 Lumber -0.09 -0.59 0.50

Total Energy -32.46 -50.15 17.69 Rice 0.09 -0.15 0.25 Wool 0.03 -0.14 0.18

Aluminum -5.62 -2.51 -3.11 Rapeseed -0.03 0.00 -0.03 Rubber -0.18 -0.14 -0.04

Copper 1.91 3.17 -1.26 Soybean 6.74 5.73 1.01 Fertilizer 0.87 0.00 0.87

Iron Ore 0.10 0.00 0.10 Total Oilseeds 9.10 5.77 3.33 Total Materials & Fibers -0.74 -0.65 -0.09

Lead 2.93 0.71 2.22 Azuki Beans 0.00 -0.24 0.24 Total Agriculture 4.98 -1.77 6.75

Manganese -0.04 0.00 -0.04 Cocoa 0.50 1.20 -0.70

Molybdenum -0.07 0.00 -0.07 Coffee -0.91 -0.49 -0.42

Nickel 1.01 0.71 0.30 Milk 0.38 0.00 0.38 Collateral Cash 12.73 12.02 0.71

Tin 1.06 0.21 0.85 FCOJ 0.31 0.29 0.02

Zinc 3.04 0.85 2.18 Sugar 1.66 0.62 1.04

Total Base Metals 3.80 1.73 2.07 Tea 0.22 0.00 0.22

Gold 5.10 5.36 -0.25 Total Softs 2.11 1.56 0.54

Palladium 0.98 -0.14 1.12

Platinum 0.93 -0.05 0.98

Silver 7.32 1.93 5.39

Total Precious Metals 14.66 7.11 7.55

Total Metals 18.45 8.70 9.75

Energy and Metals Agriculture Agriculture (continued)

Schroders

Index

Average Difference

Total -12.67 -45.05 32.38

Actual Performance -11.68 -46.26 34.58

Residual -0.99 1.21 -2.20

17.8 Crude Oil

3.9 Gasoline

4.5 Heating Oil

9.0 Natural Gas

4.4 Aluminium

6.8 Copper

11.5 Gold

2.4 Nickel

4.8 Silver

3.3 Zinc

2.4 Coffee

5.9 Corn

1.4 Cotton

1.3 Lean Hogs

2.2 Live Cattle

5.3 Soybeans

2.7 Soybean Meal

2.7 Soybean Oil

4.8 Sugar

3.3 Wheat

Rogers Int. Commodity Index TR1 Bloomberg Commodity Index TR2

Commodity Indices

1Source: Rogers International Commodity Index – 31 January 2016 2Source: Bloomberg Commodity Index – 30 September 2016

29.0 Crude Oil

1.2 Gas Oil

3.0 Gasoline

1.8 Heating Oil

5.0 Natural Gas

4.0 Aluminium

4.0 Copper

5.0 Gold

2.0 Lead

1.0 Nickel

0.3 Palladium

1.8 Platinum

4.0 Silver

1.0 Tin

2.0 Zinc

1.0 Cocoa

2.0 Coffee

4.8 Corn

4.2 Cotton

2.0 Live Cattle

1.0 Lean Hogs

1.0 Lumber

0.1 Milk

0.5 Oats

0.6 Orange Juice

1.0 Rapeseed

0.8 Rough Rice

1.0 Rubber

3.5 Soybeans

0.8 Soybean Meal

2.0 Soybean Oil

2.0 Sugar

6.8 Wheat

Energy 40%

Metals 25.1%

Agriculture 34.9%

Energy 35.1%

Metals 33.1%

Agriculture 31.8%

62

41.5 Crude Oil

5.4 Gas Oil

5.0 Gasoline

4.9 Heating Oil

3.7 Natural Gas

3.2 Aluminium

3.8 Copper

4.4 Gold

0.8 Lead

0.7 Nickel

0.6 Silver

1.2 Zinc

0.5 Cocoa

1.1 Coffee

4.6 Corn

1.5 Cotton

1.0 Feeder Cattle

1.6 Lean Hogs

3.7 Live Cattle

3.5 Soybeans

3.3 Sugar

4.1 Wheat

23.0 Crude Oil

5.0 Gasoline

5.0 Heating Oil

6.0 Natural Gas

6.0 Aluminium

6.0 Copper

6.0 Gold

1.0 Nickel

1.0 Silver

5.0 Cocoa

5.0 Coffee

6.0 Corn

5.0 Cotton

1.0 Lean Hogs

6.0 Live Cattle

1.0 Orange Juice

6.0 Soybeans

5.0 Sugar

1.0 Wheat

S&P GSCI TR1 TR/J CRB Index TR2

Commodity Indices

1Source: S&P Goldman Sachs – 30 September 2016 2Source: Thomson Reuters Jefferies CRB Trader – 31 January 2016

Energy 60.5% Metals

14.6%

Agriculture 25.0%

Energy 39%

Metals 20%

Agriculture 41%

63

Schroder Commodity Composite Composite Disclosures as of: 31 March 2016

Definition of the Firm

The Firm is defined as all accounts managed by Schroder Investment Management in the UK and

US, by wholly owned subsidiaries of Schroders PLC. Prior to 1st January 2007 SIM London &

SIM North America existed as two separate Firms which were compliant & verified as separate

entities until 31st December 2006. The consolidation of these two Firms was made as part of a

move towards creating one global Firm. Composite and Firm assets reported prior to 1st January

2007 represent those of the legacy firm which managed the product. Prior to 1st January 2011 the

SPrIM (Schroder Property Investment Management) Firm existed separate to the Schroder

Investment Management UK and US Firm, from 1st January 2011 these Firms have been

combined into a single firm.

On April 2, 2013, Schroder U.S. Holdings Inc., a subsidiary of Schroders plc, purchased STW

Fixed Income Management LLC (STW) and on July 2, 2013, Schroders plc, purchased Cazenove

Capital Holdings; assets managed by STW and Cazenove are included in the Firm from 1st

January 2014. Assets Managed against a liability driven mandate are excluded from the GIPS

Firm.

A complete list and description of the Firm's composites and performance results is available

upon request.

Composite Definition

Accounts included in the Schroder Commodity Composite seek to achieve returns above the

Commodity Composite BM or similar benchmark or an equivalent benchmark by providing capital

growth through investing commodity related instruments worldwide. Accounts will have exposure

to to a braod range of commodities, across the energy, metals and agriculture sectors.

Derivatives will be strongly used and may be used to achieve the investment objective and to

reduce risk or manage the fund more efficiently.

Composite Construction

The composite returns include all of the Firm’s separate accounts and commingled funds which

are discretionary, fee paying, tax exempt and managed as described above. New accounts are

included in the composite one full month after inception date to ensure the account has been fully

invested. Terminated accounts are excluded from the composite at the end of the previous

month. This Composite has no minimum asset level for inclusion.

Composite Inception Date: 2005-10-31

Composite Creation Date: 2008-05-19

Performance Calculation

Composite returns are presented as gross returns, including cash, reinvestment of dividends,

interest and other income earned in the period and are calculated on a trade date basis after

transaction charges (brokerage commissions). Each account's investment performance rate of

return is calculated monthly in accordance with the 'time-weighted' rate of return method (Modified

Dietz). Additional information regarding policies for valuing portfolios, calculating and reporting

returns is available upon request. The Currency of the Composite is USD. Withholding Tax

treatment may vary from portfolio to portfolio within this composite.

Composite Fee

Net returns have been calculated based upon the actual fee rates charged to each account in the

composite. The following highest fees applied to the composite are:

Highest flat fees:

March 31, 2007 - March 31, 2010: 0.95%

March 31, 2010 - onwards: 1.15%

Highest variable fee:

Since inception: 0.75% + 20% out perfromance fee

Dispersion

Internal dispersion is calculated using asset weighted standard deviation of all portfolios where

there are at least 5 portfolios that are included in the composite for the entire year.

Additional Information

The exchange rates used are provided by WM. Each currency is valued at 4 pm on the last

business day of the month.

Additional information regarding policies for valuing portfolios, calculating and reporting returns

and a description of all composites are available on request.

GIPS Compliance and Verification

Schroder Investment Management (UK & US) claims compliance with the Global Investment

Performance Standards GIPS® and has prepared and presented this report in compliance with

the GIPS standards. Schroder Investment Management (UK & US) has been independently

verified for the periods 1st January 1996 to 31st December 2014. The verification report(s) are

available upon request.

Verification assesses whether (1) the firm has complied with all the composite construction

requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and

procedures are designed to calculate and present performance in compliance with the GIPS

standards. Verification does not ensure the accuracy of any specific composite presentation.

64

This presentation does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder Alternative Solutions (the “Company”). Nothing in this

document should be construed as advice and is therefore not a recommendation to buy or sell shares.

The Company qualifies as a Société d’Investissement à Caiptal Variable (“SICAV”) and as an alternative investment fund within the meaning of article 1(39) of the 2013 Law.

Subscriptions for shares of the Company can only be made on the basis of its prospectus together with the latest audited annual report (and subsequent unaudited semi-annual

report, if published), copies of which can be obtained, free of charge, from Schroder Investment Management (Luxembourg) S.A.

The distribution and promotion of the Company's units is restricted for the purpose of the 2013 Law, to professional investors who are supposed to have sufficient experience to

judge themselves the concept of risk-spreading and the information they need to form their opinion. Accordingly, this material is targeted to institutional; professional; existing

investors and newly accepted clients of the Schroder Group where reasonable steps have been taken to ensure that investment in the Company is suitable. This material should

not be relied upon by persons of any other description.

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.

An investment in the company entails risks, which are fully described in the prospectus.

Schroders has expressed its own views and opinions in this document and these may change.

This document is issued by Schroder Investment Management 31 Gresham Street, London EC2V 7QA

This document may not be distributed to any unauthorised persons. For your security, communications may be taped or monitored.

Risk Considerations

The capital may be subject to circumstances and periods where returns could be negative. Therefore the capital is not guaranteed and may decrease.

Investments in money market instruments and deposits with financial institutions may be subject to price fluctuation or default by the issuer. Some of the amounts deposited may

not be returned to the fund.

Investments denominated in a currency other than that of the share-class may not be hedged. The market movements between those currencies will impact the share-class.

Procedures are in place to ensure that any commodity derivative instruments calling for physical delivery of the underlying commodity will be liquidated prior to delivery. But it may

be subject to an operational risk of mismatch.

The fund enters into financial derivative transactions. If the counterparty were to default, the unrealised profit on the transaction and the market exposure may be lost.

Forecasts

The forecasts stated in the document are the result of statistical modelling, based on a number of assumptions. Forecasts are subject to a high level of uncertainty regarding future

economic and market factors that may affect actual future performance. The forecasts are provided to you for information purposes as at today’s date. Our assumptions may

change materially with changes in underlying assumptions that may occur, among other things, as economic and market conditions change. We assume no obligation to provide

you with updates or changes to this data as assumptions, economic and market conditions, models or other matters change.

Important information

65

This material was prepared by Schroder Investment Management, in response to a request from the client sent to Schroder and should not be understood as an

analysis of any securities, advertising material, offer to purchase or sell, offer or recommendation of any financial assets or investment. The purpose of this

material is exclusively informative and does not include investment objectives, financial conditions or the particular and specific needs of any shareholders or other

investors. The opinions stated in this material pertain to Schroder and may change at any time. The opinions are based on the date of their submission and do not

encompass any fact that may have arisen after this date, hence, Schroder is not compelled to update this material to reflect such provisions after the submission

of the same. This material is for exclusive Financial Intermediary, Institutional and Consultant and should not be used as support material by other individuals.

THIS MATERIAL IS HIGHLY CONFIDENTIAL AND SHOULD NOT BE REPRODUCED OR DISTRIBUTED, ENTIRELY OR PARTIALLY, TO PERSONS

OTHER THAN THE ORIGINAL RECIPIENTS. The Fund and the distribution of the shares of the same are not registered at the Brazilian Securities Commission

"CVM", and therefore do not meet certain requirements and procedures usually observed in public offerings of securities registered with the CVM, with which

investors in Brazilian capital markets may be familiar. For this reason, the access of the investors to certain information regarding the Fund may be restricted.

SCHRODER DOES NOT GUARANTEE PERFORMANCE.

Important information

66

commodities and strategies - schroders · the schroders commodities team has been managing...

Documents