Whilst MPS solutions will clearly differ from more bespoke options, the broad Schroder Investment Solutions range proves that model portfolios can still be targeted to suit differing client needs – as well as offering value.
Schroder Investment Solutions’ portfolio managers Ryan Paterson and Rob Starkey, have been talking to IFA Magazine’s Brandon Russell about what’s behind all this. They highlight the global investment philosophy that has brought them success so far across their full range of multi-asset solutions – including MPS. They also explore what Schroders, as one of the UK’s leading investment managers, can offer for advisers and their clients in terms of portfolio construction, investment approach, range of options and service.
Back to the start
We started out asking what was it that originally inspired the establishment of the Schroder Investment Solutions range back in 2021? Rob Starkey picks up the history explaining: “Our solutions range was launched to meet advisers’ needs and was achieved by combining existing model portfolios from Benchmark Capital and Cazenove under the Schroders brand. It’s been great 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, sustainable 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 for financial advisers to select the most appropriate option for their particular client’s needs.”
It’s clear that the underlying investment philosophy and strategic asset allocation process which the team operates right across their multi-asset and MPS range is fundamental to shaping the full range of solutions provided by the team. That includes their impressive MPS strategies – which aim to offer value at every level.
The Schroder Investment Solutions range consists of various options including:
- Active Model portfolios
This range of 9 portfolios is built from actively managed funds and designed to appeal to clients who want their investments to be in funds and with managers who adopt an active-only approach.
- Strategic Index Model Portfolios
These portfolios are designed to provide a lower priced entry point to the team’s expertise, with 9 actively managed portfolios made up of largely passive funds.
- Sustainable Model Portfolios
This range is made up of 6 actively managed portfolios all focused on investing with purpose and with people and planet in mind.
“As well as those MPS approaches listed above, we also have a range of blended portfolios, which dynamically combine exposure to both active and passive investment approaches.” says Ryan Paterson. “We also have a global multi-asset portfolio range, and a dedicated income fund, which is a standalone strategy. Basically, we’re focused on delivering appropriate client investment outcomes by leveraging Schroders’ proven investment expertise, at a cost that can offer investors real value for money, whichever option they choose.”
“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. We then provide a range of different solutions around that which ultimately populates that strategic asset allocation to achieve the long-term goals for clients. I know that Rob is talking elsewhere in this report in lots more detail about how our SAA operates, so I’ll refer readers to that section for the full story on the detail of that process. Basically, by using this strategy we’re looking to provide consistent performance for clients that evolves into their long-term objectives actually being achieved.”
The Schroder difference – portfolio construction
In a world where advisers face a plethora of MPS providers to choose from, all offering different solutions, are there particular approaches to portfolio construction that are unique to Schroders?
That’s a definite ‘yes’ according to Paterson, as he goes on to explain: “As well as our SAA, working closely with our in-house economics team, an example of a particular advantage 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. 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-
“In addition to that, the way in which we construct our portfolios is different” adds Starkey. “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 profiles. 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.”
The Schroder difference – a focus on service
“A key differentiator for Schroder Investment Solutions is the quality of the service offering that we provide” explains Paterson. “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.”
Supporting advisers
Building relationships with advisers and making sure that they have all the resources they need to integrate MPS solutions into their businesses is also high on the list of priorities for the Schroders team.
“Our marketing, client relationship and operation and implementation teams are all of the highest standard” says Starkey. “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.”
Paterson adds “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’ client conversations from an investment perspective by delivering the right support that they need in order to do that.
“We really think about it from both sides. We produce a lot of content that is written with the client in mind, that things are explained in a clear and easy to understand way and with any jargon removed wherever possible. Equally, we’ve created content which is aimed at financial advisers to support their due diligence process, at a level that goes into the required level of detail that you’d expect.
“We produce written quarterly investment bulletins, a quarterly webinar and a quarterly video. These have all proved to be really popular with advisers. 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 useful chart of the quarter – it’s a quick and easy way to convey this 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.”
Tailored solutions to meet advisers and client needs
But the Schroder range goes a step further to ensure that advisers have every option available to them to meet a client’s individual needs. As Rob Starkey rounds off: “Across our full range of MPS solutions – and multi-asset funds too for that matter – we offer different risk profiles to meet all client needs and outcomes that they’re looking for.
“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.”
“It’s important to us that, as a leading asset manager, we continue to play to our strengths. But we also know we need to keep ahead of the game with our eyes focused on the job in hand – something we’re well used to doing. Ultimately, we believe that our objective 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 and we’re confident we’ve got the right team and resources in place to help us to keep on delivering that.”
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 CFA
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).
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