In this exclusive interview with IFA Magazine, we talk to Schroder Investment Solutions’ portfolio managers Ryan Paterson and Rob Starkey and Olivia Geldenhuys, investment director, about the global multi-asset investment philosophy that has brought them success so far. We discuss the key differences between their range of solutions and others available on the market as well as the added value that their team can bring to advisers and their clients.
Finding and knowing which multi-asset investment solution is right for your clients’ needs is a task that is as equally important as it is challenging. With so many different solutions available from so many different providers, all promising different benefits, finding one that lives up to the billing can be difficult. There are a whole host of boxes that need ticking off by advisers when evaluating the different solutions available on the market. Three of the most important are consistency of performance, openness in communication and sustainability within the investment philosophy. These three ideals are the pillars from which Schroder Investment Solutions have built their proposition of model portfolios and multi-asset funds.
Q1. IFA Magazine: What inspired the establishment of Schroder investment solutions?
Olivia Geldenhuys: “Schroder Investment Solutions was launched in 2021 to meet advisers’ needs. We combined existing model portfolios from Benchmark Capital and Cazenove under the Schroders brand. This is where we’re able to provide financial advisers across the marketplace, including Benchmark as well as others, with access to the ‘Best of Schroders’. This ultimately means that we have access to various teams including multi-asset, financial research teams etc. Bringing all those together ensures that we can use our proven track record to provide a broad range of risk mapped model portfolios and multi-asset funds to financial advisers and their clients right across the investment spectrum.”
Q2. IFA Magazine: What is your investment philosophy and how does it shape the range of solutions you provide?
Olivia Geldenhuys: “Our investment philosophy is to be active managers and on many different levels. Our starting point is to create a strategic asset allocation (SAA) for clients and then we provide a range of different solutions around that which ultimately populates that strategic asset allocation to achieve the long-term goals for clients. We’re looking to provide consistent performance for clients that evolves into those long-term objectives actually being achieved. That doesn’t mean that we will be first quartile every single month or week if we look at it from a short-term basis. But on a quarter-by-quarter basis, that consistent second quartile performance then compounds into first quartile performance over the longer term.
“It’s an active approach for us starting with strategic asset allocation which underpins a range of different investment philosophies. To give a few examples, we have a fully active range, which makes use of active managers only. We then have a range which makes use of index trackers. We have a sustainable range. We have a blended range which is dynamically combining both active managers and index trackers. Then we have a dedicated income fund, which is a standalone strategy. Finally, we have a global multi-asset portfolio range. Basically, we’re focused on delivering appropriate client investment outcomes by leveraging Schroders’ proven investment expertise, at a cost that can o‑er real value for money.”
Q3. IFA Magazine: Do you have particular approaches to portfolio construction that are unique to Schroders?
Ryan Paterson: “Yes, there are a few things here. Working closely with the in-house economics team, an example of this is that we incorporate the fiscal and transition costs of climate change into our capital market assumptions using our SAA modelling. These factors can materially impact an asset class outlook and the ability to reduce returns in the future.
“Ours is a three-step approach here. There’s a physical cost which focuses on what happens to output and productivity as temperature rises. There’s a transition cost which considers the economic impact of steps taken to mitigate temperature increases. Finally, there are stranded assets and these account for the losses incurred where oil and other carbon-based forms of energy are written off.”
Rob Starkey continues, commenting: “In addition to that, the way in which we construct our portfolios is different. That’s because we make sure that every single asset is, broadly, contained in every single portfolio. That means when we construct given solutions, for example UK equity only, we’ll hold UK equity as if it’s a standalone portfolio, and we’ll have that exposure in different weights across all risk proles. The reason that is unique is it means that when you look at our various solutions, we have good risk-return separation, regardless of the philosophical approach.
“We also have a larger allocation to alternatives, and it’s quite a broad allocation too. That’s a unique aspect because we’re not constrained here. We go directly to the managers so we’ve got a large subset of unique asset classes thereby boosting diversification.
“As a last point, given the breadth and scale of our research capabilities, we have quite unique positions relative to our peers because we are scouring the whole globe for opportunities, given that we have a team of more than 100 people involved.”
Q4. IFA Magazine: What longer term trends are you currently seeing in the investment industry that impact portfolio construction?
Rob Starkey: “There are quite a few different trends out there just now. A significant one is the impact of tax. In taxable accounts such as GIAs, we’re seeing that there is a rise in popularity of funds versus models. That means that you can perform the ongoing management within the structure without creating unnecessary tax burdens for investors.
“We’re also seeing a constant shift to technology, whereby being able to look through a given fund structure, either by technology or via reporting, is quite important. But alongside that, there is continuing consolidation that we are seeing as advisers move from advisory to discretionary portfolio management. This is where having a wider approach to your solutions partner really matters and we have that across multiple fronts.
“Our marketing, client relationship and operation and implementation teams are all of the highest standard. What we’re seeing is a proliferation of access through various points. Right now, we’re on 16 platforms and growing both domestically and internationally. That’s where you need an excellent team to support you, which we believe we have. Some of the longer-term trends that we also see are consolidation across the sector which we expect to continue.
“Investment solutions are now moving from centralised investment propositions to also include centralised retirement propositions on the back of the March 2024 release of the Thematic Review of Retirement Income Advice. It’s something we will be keeping on top of.
“In conclusion, it’s important that as a leading asset manager, Schroders continues to play to our strengths but also that we keep ahead of the game with our eyes focused on the job in hand. Ultimately, this is all about delivering consistent returns for investors and building great relationships with advisers and their clients along the way. We’re committed to delivering robust investment solutions that work for advisers and their clients now and in future.”
Q5. IFA Magazine: What resources do you provide to support advisers integrating your solutions into their businesses?
Olivia Geldenhuys: “When it comes to resources, we live in a day and age where you basically have to do it all, so we provide both written content and video content. We are determined to help advisers with the heavy lifting in a way that really is two-fold. Firstly, it’s to enhance consumer understanding so that the underlying client knows what they’re investing in, so they feel comfortable with those investments and what they’re aiming to achieve. Secondly, it’s crucial that we can enhance advisers’ conversations that they have with their clients from an investment perspective by delivering the right support that they need in order to do that.
“So, we really think about it from both sides. We produce a lot of content that is written with the client in mind. We make sure that things are explained in a clear and easy to understand way with any jargon removed wherever possible. But then equally we’ve got content which is aimed at financial advisers to support their due diligence process, at a level that goes into great detail.
“We produce written quarterly investment bulletins. There’s also a quarterly webinar and a quarterly video, which have been really popular. Here our investment experts talk about what happened in markets over the quarter and how we have positioned our portfolios accordingly. We also produce a chart of the quarter which people say is really useful because it’s a quick and easy way to convey important information. This has been targeted towards the needs of clients themselves. Therefore, it is very easy for advisers to just download that video and send it on to clients for their information if they want to.”
Q6. IFA Magazine: How do you tailor your solutions to meet the needs of advisers and their clients?
Ryan Paterson: “The main point to highlight here is that we have, across the range of solutions that we offer, risk profiles to meet all client needs and outcomes that they’re looking for. These are available on multiple platforms as we’re aiming to meet advisers’ needs. Maybe they’ve got 1 or 2, maybe even more, legacy-type platforms on their books so they can run the same type of solutions across the range of platforms.
“Where there are specific, unique requirements for either a marketing aspect or a tailored investment outcome, we can help with this too. We offer white-labelling options as well as tailored portfolios, where we assist advisers and their clients in transitioning from primarily an advisory relationship to a discretionary relationship with their own unique constraints.”
Q7. IFA Magazine: How do you differentiate yourself from other providers in the market?
Olivia Geldenhuys: “A key differentiator for us at Schroder Investment Solutions is the quality of the service offering that we provide. We are a large, well-established institution, benefitting from access to multiple resources in-house. This all means that we can deliver the right service to support the needs of financial advisers either via virtual or in-person meetings. The strength of that service offering is really what makes us unique. Ultimately, it’s the engagement that financial advisers have with us, not only actively managing clients’ investments, but also providing rich and informative reporting – including quarterly performance updates, ongoing market commentary, webinars and video bulletins etc, which makes the difference. We’re able to build long-term, trusted relationships with advisers, enabling them to deliver appropriate investment solutions for their clients. We’ll also continue to keep them updated with progress as the years go on.
“Investment performance is obviously something that none of us can guarantee but what we aim to provide is consistency of performance over the longer term. When you combine such consistent performance with exceptional service and access to the depth of resources that we have, we really become that trusted investment partner. The package represents more than just an investment solution, it’s all about that relationship based on trust. We help advisers and their teams with Consumer Duty queries, with sustainability in their own businesses, we also produce lots of thought leadership and generate guides for advisers to help them with various issues. It’s really that combination of consistency, performance and exceptional service that I’d argue sets us apart.”
Q8. IFA Magazine: What is the culture of Schroders in relation to innovation?
Ryan Paterson: “Innovation is really important to us and in so many ways. Both myself and Rob as portfolio managers continue to stress the need for innovation in what we do with our investment strategies. We were one of the first to market with our blended proposition, which is a multi-asset fund blending both passive and active funds together. And also in driving down the costs of those solutions, which is obviously beneficial to both advisers and their clients.
“On top of that, we’ve also launched an alternatives vehicle. This gives us the flexibility and scope to add in funds that you couldn’t normally use on existing platforms. These have certain requirements. They’re not daily dealt always, sometimes they have liquidity constraints, and they can only be dealt weekly. These can’t be held directly on investment platforms. Therefore, there was a need for us to launch our own fund to be able to dynamically manage that element of the portfolio. It’s about being proactive and ensuring we deliver for clients.”
Olivia Geldenhuys: “From a Schroder group perspective, innovation is something that we have to be thinking about if we want to stay relevant as a business. An interesting aspect of this from my perspective is when ChatGPT was making headlines and everyone really started speaking about AI, Schroders was incredibly quick to launch its own internal version called ‘Genie’.
“It’s something that they’ve provided a lot of training with. We’ve got different pathways that people can follow to make sure that we can all harness the capabilities of that to make things much more efficient. From a Consumer Duty perspective, it can help in making content easy and understandable for clients. Having an in-house AI option, where you know that your information is secure in that environment and you’re able to put content in there, it can help you produce content in a client friendly way. It’s just another example of the different ways in which we look to innovate in order to improve our service and product range.”
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About Robert Starkey Portfolio Manager, Schroder Investment Solutions
Robert joined Schroders in May 2021 and co-manages the Schroder Investment Solutions range of products. He started managing multi-asset model portfolios and funds in 2013, and has experience in both the South African and UK markets. Robert is a CFA Charterholder, holds the CIPM designation, and has passed the CFP examinations. He holds degrees in Economics (Cum Laude, undergraduate), Financial Planning (First Class, honours), and Investment Management (Distinction, masters).
About Ryan Paterson Portfolio Manager, Schroder Investment Solutions
Ryan joined Schroders in May 2021 and co-manages the Schroder Investment Solutions range of products. He has over 20 years’ experience in the investment industry, with previous roles including Research Manager, Proprietary Trader and Investment Analyst. Ryan is a Chartered Financial Analyst (CFA) Charterholder and also holds the Investment Management Certificate (IMC).
About Olivia Geldenhuys Investment Director, Schroder Investment Solutions
Olivia joined Schroder Investment Solutions in 2022 and focuses on providing key information about the portfolio ranges and market views to support the conversations advisers have with their clients. She has worked with financial advisers since 2012 to support them in integrating a centralised investment proposition into their business. Olivia holds a BCom in Investment Management from the University of Pretoria in South Africa with an Honours in Financial Management. She also holds a post-graduate diploma in Financial Planning.
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