Schroder ISF* Strategic Credit
A different way of exploiting the European corporate bond opportunityWhat makes this approach different?
In the European credit markets, it’s easy to find managers who focus on the investment-grade or high-yield segments, but those who specialise in the middle of the credit spectrum are a rarer breed. Schroder ISF Strategic Credit is a “crossover” portfolio investing predominantly in BBB-rated and high-yield corporate bonds.
*Schroder International Selection Fund is referred to as Schroder ISF.
Higher quality high yield
We favour bonds in the BB category, at the “safer” end of the high yield spectrum. We believe this area gives investors the best of both worlds: high yield returns but with a manageable level of credit risk.
Limited interest-rate risk
We like to keep portfolio duration relatively low. This helps limit volatility and enables us to focus the bulk of our “risk budget” on sector allocation and stock selection, which is what we do best.
The unconstrained advantage
This is a bottom-up, flexible strategy that is not constrained by any benchmark. Every holding has to earn its place in the portfolio, contributing to our goals of attractive income and capital growth potential.
Attractive opportunities in the “middle ground” of credit
While most corporate bond funds specialise in either investment-grade or high-yield securities, we believe some of the most interesting opportunities sit on the borderline between these two categories: the so called crossover names. Find out why.
Listen to our podcast episode on BB-rated credit
Credit fund manager Peter Harvey joins the pod to discuss BB-rated credit and why it has been a sweet spot recently in credit
Explore our credit funds
You can find more information, including fund literature, holdings and performance data in our fund centre.
"In terms of investment style, this is very much a bottom-up security picker’s strategy. Portfolio construction is not constrained by a benchmark, and we aim to deliver most of our outperformance through security selection, with much less emphasis on macro and top-down views."
Credit Portfolio Manager
Investing in credit with Schroders
In global corporate bond markets, there’s a constant race for information. The winners are those who spot the key trends early and uncover opportunities that are overlooked by their competitors.
What are the risks?
Capital risk / distribution policy: As the fund intends to pay dividends regardless of its performance, a dividend may represent a return of part of the amount you invested.
Contingent convertible bonds: The fund may invest in contingent convertible bonds. A reduction in the financial strength of the issuer of such bonds may result in losses to the fund.
Counterparty risk: The fund may have contractual agreements with counterparties. If a counterparty is unable to fulfil their obligations, the sum that they owe to the fund may be lost in part or in whole.
Credit risk: A decline in the financial health of an issuer could cause the value of its bonds to fall or become worthless.
Currency risk: The fund may lose value as a result of movements in foreign exchange rates.
Derivatives risk: Derivatives may be used to manage the portfolio efficiently. The fund may also materially invest in derivatives including using short selling and leverage techniques with the aim of making a return. A derivative may not perform as expected, may create losses greater than the cost of the derivative and may result in losses to the fund.
High yield bond risk: High yield bonds (normally lower rated or unrated) generally carry greater market, credit and liquidity risk.
IBOR risk: The transition of the financial markets away from the use of interbank offered rates (IBORs) to alternative reference rates may impact the valuation of certain holdings and disrupt liquidity in certain instruments. This may impact the investment performance of the fund.
Interest rate risk: The fund may lose value as a direct result of interest rate changes.
Liquidity risk: In difficult market conditions, the fund may not be able to sell a security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares.
Market risk: The value of investments can go up and down and an investor may not get back the amount initially invested.
Operational risk: Operational processes, including those related to the safekeeping of assets, may fail. This may result in losses to the fund.
Performance risk: Investment objectives express an intended result but there is no guarantee that such a result will be achieved. Depending on market conditions and the macro economic environment, investment objectives may become more difficult to achieve.
Sustainability risk: The fund has environmental and/or social characteristics. This means it may have limited exposure to some companies, industries or sectors and may forego certain investment opportunities, or dispose of certain holdings, that do not align with its sustainability criteria chosen by the investment manager. The fund may invest in companies that do not reflect the beliefs and values of any particular investor.
Important Information
Note regarding the Marketing material for Qualified Clients and Sophisticated Investors only: This communication has been prepared by certain personnel of Schroder Investment Management (Europe) S.A (Registered No. B 37.799) or its subsidiaries or affiliates (collectively, "SIM"). Such personnel are not licensed nor insured under the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 1995 (the "Investment Advice Law"). This communication is directed at persons (i) who are Sophisticated Investors as listed in the First Schedule of the Israel Securities Law (ii) Qualified Clients ("Lakoach Kashir") as such term is defined in the Investment Advice Law; and (iii) other persons to whom it may otherwise lawfully be communicated. No other person should act on the contents or access the products or transactions discussed in this communication. In particular, this communication is not intended for retail clients and SIM will not make such products or transactions available to retail clients.
This webpage does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder International Selection Fund (the “Company”). Nothing on this webpage should be construed as advice and is therefore not a recommendation to buy or sell shares. An investment in the Company entails risks, which are fully described in the prospectus.
Subscriptions for shares of the Company can only be made on the basis of its latest Key Information Document and prospectus, together with the latest audited annual report (and subsequent unaudited semi-annual report, if published), copies of which can be obtained, free of charge, from Schroder Investment Management (Europe) S.A. For Luxembourg, these documents may be obtained in English, free of charge, from the following link: www.eifs.lu/schroders.
Schroders may decide to cease the distribution of any fund(s) in any EEA country at any time but we will publish our intention to do so on our website, in line with applicable regulatory requirements.
The fund has the objective of sustainable investment within the meaning of Article 8 of Regulation (EU) 2019/2088 on Sustainability-related Disclosures in the Financial Services Sector (the “SFDR”).
Any reference to sectors/countries/stocks/securities are for illustrative purposes only and not a recommendation to buy or sell any financial instrument/securities or adopt any investment strategy.
Past Performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of investments to fall as well as rise.
Schroders has expressed its own views and opinions in this document and these may change.
Schroders will be a data controller in respect of your personal data. For information on how Schroders might process your personal data, please view our Privacy Policy available at www.schroders.com/en/privacy-policy/ or on request should you not have access to this webpage.
A summary of investor rights may be obtained from https://www.schroders.com/en/lu/private-investor/footer/complaints-handling/
For your security, communications may be recorded or monitored.
Issued by Schroder Investment Management (Europe) S.A., 5, rue Höhenhof, L-1736 Senningerberg, Luxembourg. Registration No B 37.799.