HEAD-TO-HEAD: Investec vs Schroders

Added 15th July 2016

Fund Selector Asia compares the Investec Global Energy Fund and the Schroder ISF Global Energy Fund.

HEAD-TO-HEAD: Investec vs Schroders

Oil prices have been rebounding from their low of around $30 at the start of the year, as a weaker dollar tends to make the greenback-denominated oil more attractive to holders of other currencies.

On the demand side, there has been quite a debate around how the Brexit result will impact crude oil. But there has been no change to the physical oil market globally, as billions of people continue to fuel up their cars, and factories continue to operate.

On the supply side, opinions are also mixed. The extent to which US shale oil producers have managed to make production more cost-efficient is a factor in determining downward pressure on prices.

Against this backdrop, Luke Ng, senior vice president of research at FE Analytics provides a comparative analysis of two funds: the Investec Global Energy Fund and the Schroder ISF Global Energy Fund.

“One key approach to identify investment strategies of energy funds is to look for their investment portfolios. If they adopt a more diversified approach, that would be good for investors who look for returns in the long term,” Ng said.

Investment strategy


Both the Investec Global Energy Fund and the Schroder ISF Global Energy Fund are domiciled in Luxembourg, and they use the MSCI AC World Energy Index and the MSCI World Energy Index as their respective benchmarks. 

The MSCI AC World Energy Index consists of large- and mid-cap companies in both developed and emerging markets within the energy sector, whereas the MSCI World Energy Index includes companies in developed markets only.

For the Investec fund, the investment process involves fundamental commodity research, in which the team assesses supply and demand of the global oil market, as well as other macroeconomic factors that drive energy prices, Ng said. 

“The next stage involves individual company research, where the managers would identify businesses with high conviction that fit into the trends and the development of the sector."

The Investec fund holds a concentrated portfolio of around 40 stocks, and they are mainly large-to-mid-cap companies, he said.

For the Schroder fund, the strategy adopts a bottom-up approach to select stocks, which are undervalued growth companies with strong financial strength. 

“The team would estimate fair value and target share prices throughout the stock selection process by meeting the management, analysing the business outlook, cash flow management and getting input from industry contacts."

The Schroder fund also holds a concentrated portfolio with 30 to 40 stocks, but relative to Investec, the Schroder team is more willing to look for opportunities in the smaller cap space of the sector.

For country allocation, the Schroder fund used to have a lower exposure to US companies than the Investec product.

But now, both funds have over 80% exposure to North America (US and Canada) and the UK.


Sector Weightings

Investec  Schroders 
Oil and Gas  94.6  Basic Materials  96.8 
Telecom, Media, Technology  2.3 Others 3.3
Hardware 1.7    
Money Market 1.4    

Source: Funds' Factsheet; FE

Region Weightings

Investec  % Schroders  %
North America  67.7  North America  63.5 
Europe Ex-UK 12.5 UK 25.0
UK 12.4 Europe Ex-UK 8.3
Pacific Basin 5.0 Others 3.3
Asia Pacific 1.0    

Source: Funds' Factsheet; FE




The Investec fund has a higher weighting in integrated oil and gas companies, and tends to adjust subsector weightings after analysing the commodity market, he said. 

“Therefore, volatility of the fund tends to be lower [than the Schroders fund]. The stronger focus in larger cap also helps the fund to ride a commodity bear market better."

The Schroder fund maintains a strong focus on the upstream business and it tends to be more sensitive to the movement of oil prices, he said. 

This has exerted some pressure on the performance of the Schroder fund over the last one-, three- and five-year periods, as crude oil prices fell from over $100 per barrel to below $30 at the beginning of 2016. 

“However, the Schroder fund enjoyed a strong rally in the first half of this year and outperformed the Investec fund following the rebound of oil prices."

The bias toward the growth subsector and the tendency toward small-cap stocks make the Schroder fund the more volatile of the two, he added.



The two funds have had similar performance patterns over the past three years, FE data shows.




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