London-headquartered investment firm Schroders has submitted a number of changes to the unitholders of the Schroder Specialist Value UK Equity fund, that are subject to unitholders’ approval at a meeting that will be held next 7 February.
Schroders proposed to rebrand the fund as Schroder Responsible Value UK Equity fund and to amend its investment objective and policy.
The main change will be the introduction of a responsibly-managed screen. The fund will adopt a new benchmark, a custom responsibly-screened FTSE All-Share index and will follow a responsible investment policy which excludes the companies:
- involved in indiscriminate weaponry;
- involved in conventional weapons if their strategic military supplies exceed 10% of turnover;
- deriving more than 3% of revenues from the production or distribution of pornography;
- whose most business activity or focus (defined as more than 10% of group revenues) is tobacco, gambling, non-military firearms, high interest rate lending or human embryonic cloning;
- deriving more than 10% of revenue from tar sands or thermal coal;
- deriving more than 5% of their revenues from alcoholic drinks (Schroders specified these will only be eligible for investment if they meet industry standards for responsible marketing and retailing.)
The fund already implements environmental, social and corporate governance factors (ESG) into its investment process, including analysis of companies’ treatment of customers, suppliers and the environment.
“We believe that there is significant demand for a responsibly-screened value fund and the proposed changes to the fund’s name, benchmark and investment objective and policy will build on the current strategy’s established characteristics. The change to the investment objective and policy is not expected to lead to significant alterations to the fund’s portfolio of holdings and the fund will continue to focus on undervalued companies.
“If the responsible investment policy was applied to the fund’s current holdings and the FTSE All-Share index today, it would remove just 3% of assets in the fund and 11% of the index by weight. To enhance unitholder understanding we have also added to the investment objective and policy a reference to the fund holding a concentrated portfolio which is typically between 30 to 50 companies,” Schroders explained in shareholder letter.
If the changes are approved on 7 February 2018, they will be effective on 14 February 2018.