US ‘Largest Growth Opportunity in the World’ for Schroders

The firm also launched a “mirror image of our most successful strategy in the world in the last few years,” the global multi-asset income strategy. That fund has raised more than $6 billion in the last two years outside the United States, according to Dasher.

It was developed about three years ago, Dasher said, with collaboration between the firm’s equity, fixed income and multi-asset teams. “It was built with the idea that in order to generate superior risk adjusted yield-based returns, where yield is a large driver of the overall total return experience, it’s necessary to build a portfolio where you are constructing it with a somewhat unconstrained but collaborative approach.”

That means the underlying components are not “benchmark-like,” Dasher said. “We have an overarching portfolio manager who has comprehensive control of the risk budgeting process and works with the various equity and fixed income teams to determine how best to allocate risk capital given where the best sustainable comparative advantages are in the yield-driven universe.”

A good example, he said, is when global clients benefited from overallocations to U.S. municipal bonds late last year when those products were significantly oversold.

“It’s very fluid across the opportunity set in terms of where it goes within capital structure, where it goes across the global opportunity set. At no point in time is the portfolio very benchmark-like and yet we’ve been able to generate a very high sustainable yield with very good drawdown characteristics.”

One way the U.S. market differs from other markets is that investors less willing to buy products based on their concept, “which is a surprise because the United States tends to be a more entrepreneurial market overall,” Dasher said. He said that some “asset allocators and wealth managers outside the United States are more willing to make allocations to a strategy based on the strength of its concept and the investment process behind it,” whereas in the States, products typically need “a little bit more time and proof statements in terms of realized performance or asset gathering momentum to break through.”

Of course, regulations in the United States are very different from those in other areas. “The U.S. regulatory structure requires a more diverse range of product structures to address all the various aspects of the market,” Dasher said. “UCITs are much more flexible in terms of fees, both in terms of the ability to do zero-fee share classes where you do institutional pricing on a segregated account basis, to performance fees, to various fee share classes to meet client and distributor needs. The United States is much more rigid in that area, so we end up with more clones of our strategies in ’40 Act funds, collective investment trusts and 3C7 partnerships.”

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Correction: An earlier version of this article incorrectly stated that U.S. business accounted for about 20% of Schroders’ global business. The correct percentage is 10%. 

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