Schroder ISF Frntr Mkts Eq B Acc USD |
by Harsh Jain
Schroder ISF Frontier Markets benefits from an experienced manager and access to emerging-markets resources at Schroders. We continue to assign an Above Average People rating because of team stability and solid track record. The strategy continues to be well executed, but off-benchmark bets play a large part here. The process, a combination of bottom-up and top-down country analysis, though having an element of subjectivity, has been well executed, supporting a maintained Process rating of Average. Rami Sidani has been the lead manager of this strategy since its inception in December 2010. Sidani has 18 years of Middle East North Africa and frontier-markets experience and is well-supported by four dedicated frontier-markets analysts; they can also leverage the wider 52-member emerging-markets team at Schroders with good average experience. The frontier-markets universe, which has undergone many reclassifications, has stabilized and become more homogeneous in the last few years. Historical changes in the universe include United Arab Emirates and Qatar, which accounted for 30%-40% of the MSCI Frontier Markets Index, being promoted to emerging-markets status in 2014, Pakistan in 2017, and Argentina in 2018. More recently, Kuwait, which was 36% of the index, joined emerging markets in November 2020. As a result, the investment universe dominated by the Middle East markets a few years ago is now more tilted toward Asia, with Vietnam the largest constituent at 28% as of October 2023. The frequent changes in benchmark have also led to this strategy adopting a custom benchmark that gives 10 percent weight to emerging markets. It is worth noting that the manager tends to invest up to a third of the portfolio in off-benchmark countries, such as UAE, Kuwait, Saudi Arabia, and Georgia, that were once a part of the benchmark. Over its life span, the strategy's performance has been solid. From the fund’s inception in December 2010 to the end of September 2023, the clean share class outperformed the MSCI Frontier Markets Index and global frontier markets equity Morningstar Category peers. It is pleasing to see that the outperformance came from both country allocation and stock selection. |
Morningstar Pillars | |
People | Above Average |
Parent | Above Average |
Process | Average |
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