Access to Schroders’ best global ideas in one trade

Please note: This interview was recorded on 21 March 2025.

• Name of the fund and ASX ticker: Schroder Global Equity Alpha Fund – Active ETF (ASX: ALPH)
• Asset Class: Global equities
• Investment objective: To provide capital growth in excess of the MSCI All Country World Index (NET TR) Index before fees over a three to five year period by investing in equities of companies worldwide.
• Fund Page: Schroder Global Equity Alpha Fund – Active ETF (ALPH)

If you had to sift between 4,000 global stocks tomorrow and only pick 40-60 of the best options, could you do it? And would that portfolio be full of tech unicorns, defensive darlings or a general mix?

As with most things in life, your ability (and success in doing so) comes back to the right team, access, expertise and investment process.

Sebastian Mullins, Head of Multi-Asset and Fixed Income for Schroders Australia, notes that the Schroders Global Equity Alpha Fund – Active ETF benefits from a broad network of experts and a specialist section team.

“Globally, we have 160 analysts over 17 countries whose job it is to find these companies, kick the tyres and then support them up to the portfolio management team. We also have 12 sector specialists who then decide how that stock fits compared to their global competitors. So, having that team behind us allows us to pick the best companies,” he says.

The portfolio has 40-60 of those stocks that the team deem the ‘best ideas’, and while the portfolio has a growth focus, it’s far from an ode to the Magnificent Seven. Tech is still a dominant theme, but Mullins explains they are looking for what he terms as a ‘growth gap’ to fuel the returns in the portfolio.

Identifying the ‘growth gap’

The ‘growth gap’ refers to companies where Schroders believes there is greater growth potential than market analysts expect. He groups these into two buckets.

1. Core compounders – 60-70% of the portfolio

“These are high quality companies, market leading names with a very, very deep embedded competitive advantage. They might have killer products that we all know and love and use or they might have great technology, IP or maybe even patent protection,” Mullins says.

2. Opportunistic investments - 20-30% of the portfolio

“Companies that have a short-term catalyst that might be more cyclical in nature,” says Mullins, providing the example of how the iPhone’s initial launch was a catalyst for Apple.

An example of a core compounder in the portfolio is German stock SAP, which “recently delivered fantastic returns. It outperformed the German benchmark by 14%, the S&P 500 by 30% over the last 12 months because the AI theme that pushed US equities higher was finally found in Europe.”

Mullins explains that SAP is focused on cloud computing, but is a data provider for companies.

Managing risk in the portfolio

In today’s uncertain environment, risk management is more critical than ever. There are two layers of risk management in the portfolio.

“First is the fundamental risk management of the stock and company themselves,” Mullins says, highlighting concerns like operational leverage or management of ESG concerns as well as domestic geopolitics.

He generates a risk score for the companies based on this, with the size of the allocation dictated by the level of risk.

The second level relates to risk control on selling companies.

“If the growth gap diminishes quickly, we get out. If the risk grows above our tolerance, we get out,” Mullins says.

He also monitors tracking error in the country and sectors Schroders invests in.

This approach has supported consistent returns in the Fund, and outperformance against the benchmark over five years.

“We’ve had a consistency hit rate of 62% which is quite strong and we have an upside capture ratio above 100%, and downside capture ratio of 90%. We’re participating in the upside, but minimising the volatility in the downside,” he says.

“High alpha, high concentration but minimised risk delivers consistency of returns for our clients.”

To find out more about the Schroder Global Equity Alpha Fund – Active ETF (ASX: ALPH), the investment process and the companies Schroders invests in, watch the Fund in Focus above.

Time codes:

0:00 - Introduction
0:30 - Overview of the strategy and which investors it might suit
2:44 - Schroders approach to portfolio construction
4:13 - The big themes driving markets and performance
5:57 - Risk management for the portfolio
8:23 - Where ALPH sits in a portfolio

ETF

Schroder Global Equity Alpha Fund – Active ETF (ALPH)

Global Shares

View