Schroders launches Alternatives Fund with ILS component for UK investors

Schroder Investment Solutions, a division of the global asset management group Schroders that provides portfolio solutions and management via investment advisers to retail and wealth clients, has launched the Schroder Alternatives Fund, a strategy that looks set to draw on the managers insurance-linked securities (ILS) expertise.

ILS is increasingly being incorporated into multi-asset managed fund strategies that are accessible by a more retail type of investor, typically through wealth platforms or to high-net worth investors.

By doing so through what it terms its model portfolio solutions range, Schroder Investment Solutions ensures that ILS will only play a diversifying role within the accessible strategy, bringing the value of a relatively uncorrelated and currently relatively high yielding asset class to its investors, through its managed solutions range.

Schroders said that the new Alternatives Fund strategy will allocate capital to opportunities in asset classes that are not typically available directly through UK retail investment platforms.

The range of alternative asset classes invested in can include private equity, hedge funds, commodities, real assets and specialised property, Schroders explained.

Delivering uncorrelated and differentiated returns to investors, as a small part of their overall wealth portfolios, is the goal with the addition of this new strategy, through the managed portfolio approach and the new Alternatives Fund will only be available to existing clients of the Schroder Investment Solutions model portfolio service.

The value of diversification in a time of financial market volatility is seen as likely to be a driver for attracting investors to allocate some of their portfolio to a fund such as this, as too is the attraction of alternative asset classes that are much harder for UK investors to access becoming more readily available.

Alex Funk, chief investment officer at Schroder Investment Solutions called the new Alternatives Fund launch a “democratisation” of alternative assets for investors, in speaking with FT Adviser.

He noted that access to alternatives is becoming critical for investors, saying that his team aims to provide the best outcomes for clients.

Funk told FT Adviser that the new Schroder Alternatives Fund will have access to insurance-linked securities (ILS), which he called “uncorrelated” to traditional fixed income.

Saying, “We’re basically providing capital to reinsurance companies for these catastrophe risks like hurricanes and so on.

“The reason the bond would move down in price is unrelated to interest rates, but more related to something like hurricane insurance after having to pay out, then you see that you’re getting different returns that you would form traditional fixed income.”

Within Schroders Capital, the professional investor focused private assets specialist arm, is where the Schroders Capital ILS team sits, with its expertise in managing one of the largest catastrophe bond funds in the world, as well as a full-range of private ILS and reinsurance investment fund strategies.

Presumably, any access to ILS that the Schroders Investment Solutions Alternatives Fund strategy has, will be through one of the funds developed by the Schroders Capital ILS team, perhaps the GAIA cat bond range.