Investment Analysis Report: iShare vs. Schroder UK Funds

This report provides a comprehensive analysis of two UK-based investment funds: iShare-100-UK-Equity-Index-fund and Schroder Core UK Equity. The introduction offers an overview of the UK fund management industry and the role of fund management, followed by a critical assessment of the two investment management companies. The report delves into the funds' overviews, investment philosophies, portfolio management strategies, asset allocation techniques, charges, and performance metrics, including Sharpe and Treynor ratios, and Jensen's alpha, comparing them to the FTSE 100 index. The analysis includes sector breakdowns and comparisons of returns over specific periods. The report then compares the funds' overall performance, discussing potential reasons for outperformance or underperformance relative to benchmarks, and concludes with critical reflections and recommendations for improving fund performance. References and appendices support the analysis.

Running head: INVESTMENT ANALYSIS
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Student Names: Asif Ali
Student ID's: 18430788
Module Code: FINM014
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Student Signature: Asif Ali Date: 23/04/2019

1INVESTMENT ANALYSIS
Table of Contents
Introduction:....................................................................................................................................2
i) Brief overview of the UK fund management industry, while discussing the role of fund
management:....................................................................................................................................2
ii) Critically assessing the different investment management companies in UK:...........................4
a) Overview of the funds:................................................................................................................4
b) Investment philosophies portfolio management and strategies:..................................................5
c) Asset allocation techniques and practises:...................................................................................6
d) Charges:.......................................................................................................................................8
e) Investment performance compared to another fund and benchmark:.........................................9
iii) Comparing the funds based on their overall performance and discussing possible reasons why
the fund manager outperforms the benchmark:.............................................................................12
iv) Critical reflection and recommendation to improve the performance of the funds:................14
Conclusion:....................................................................................................................................14
References and Bibliography:........................................................................................................15
Appendices:...................................................................................................................................17

2INVESTMENT ANALYSIS
Introduction:
The overall assessment mainly aims in detecting the performance of two funds situated in
United Kingdom. Moreover, two funds namely iShare-100-UK-Equity-Index-fund and Schroder
Core UK Equity, which is operation in United Kingdom to improve the level of income from
operations. The overall performance of the funds is compared with each other and then with the
FTSE 100 index, which can help in generating high level of income from investment. Adequate
evaluation has been conducted, while assessing the different investment management companies
that is been situated in UK. In addition, the performance of the fund managers is mainly used for
detecting the how the fund could outperform the benchmark.
i) Brief overview of the UK fund management industry, while discussing the role of fund
management:

3INVESTMENT ANALYSIS
The UK fund management industry has relevantly flourished due to the presence of
adequate investor demand. The fun manager to allocate the relevant fund over the period of
investments uses the diversified investment options. The above figure provides information on
the current asset management industry, which is currently present in UK. The total assets
managed in UK are estimated to be at the levels of £9.1 Trillion. Therefore, it could be detected
that UK fund management industry is relevantly high, which allows the investors to improve
their returns from investment (Mason and Harrison 2015).
There are specific roles of fund management industries, as it helps in managing the
institutional arrangement, products, processes and regulation of the companies. These roles are
depicted as follows.
 The fund management industries are responsible for creating the overall funds for the
Institutional arrangement, which can help in detecting investments that needs to be
conducted for improving the level of income.
 Moreover, the fund management industries are responsible for creating attractive
Products for investment, which allow the investors to diversify their risk and generate
higher returns. The fund-management company create product based on the risk attributes
of as investor, which is acknowledge before creating their investment portfolio (Sullivan
and Mackenzie 2017).
 The fund management company is also responsible for depicting the process of the
investment, which are used by investors for improving their return on investment.
 In addition, the fund manager’s presence also forces the companies to alter their
regulations, as per the industry standards. The valuation of the fund management industry

4INVESTMENT ANALYSIS
is based on simple criteria, where not fulfilling one objective would result in the rejection
of the investment option.
ii) Critically assessing the different investment management companies in UK:
a) Overview of the funds:
iShare-100-UK-Equity-Index-fund:
The above figure provides information on the iShare-100-UK-Equity-Index-fund, which
relevantly has a total holding of 101. In addition, the fund operates in UK, where all the
companies situated in UK is being used for investments. The fund has been operating since June
of 2012, where relevant investment is being conducted in appropriate stocks to support the
operations. Moreover, the settlement of the fund is conducted in +3 days of the trade date, while
a minimum of GBP 500 is needed for the investment in the fund. The asset class that is used by

5INVESTMENT ANALYSIS
the fund is equity, where no other investments are conducted in other classes (Blackrock.com
2019).
Schroder Core UK Equity:
The overview of the fund Schroder Core UK Equity is mainly depicted in the above
figure, where the fund was launched during 2002. The fund mainly operates in United Kingdom
and selects stocks, which pitons in UK. In addition, the total fund size is at the levels of 73.43
million, where the benchmark is FTSE All Share Total Return. The currency has been displayed
to be in pound, where the fund manager was David Docherty and Matt Bennison. The share class
of A is being used for conducting the relevant investments in the fund (Schroders.com 2019).
b) Investment philosophies portfolio management and strategies:
iShare-100-UK-Equity-Index-fund:

6INVESTMENT ANALYSIS
The main philosophy of the fund is to archive capital growth by tacking the performance
of FTSE 100, which investing in equity securities of companies that make the benchmark index.
The fund manager directly replicates the benchmark to generate higher returns from investment.
Moreover, the fund is leaned on higher risk attributes, where the synthetic risk & reward
indicator is at the levels of 5, which indicates that fund has the potential to provide higher
rewards in the long run (Blackrock.com 2019).
Schroder Core UK Equity:
The main aim of the fund is to provide capital growth by investing in UK companies. The
fun directly investment about 80% in the UK equities, while the rest is invested in other equities,
collective investment schemes, bonds and warrants, and holds cash. The fund manager also
indicates that the use of derivatives allow them to minimise the risk attributes of the investment
and maximise their returns (Schroders.com 2019).
c) Asset allocation techniques and practises:
iShare-100-UK-Equity-Index-fund:

7INVESTMENT ANALYSIS
The above figure provides information about the overall sector breakdown, where
investment has been conducted by the fund. The major investment has been conducted by the
fund is in financial sector following with an investment in the Oil & Gas sector. The figure
directly indicates that the lowest investment is been conducted in the technological sector by the
fund. The sector breakdown directly indicates that the exposure is mainly conducted on goods
and services to generate high level of income from investments. However, the allocations are
subject to change with the overall alterations in the performance of the fund (Blackrock.com
2019).
Schroder Core UK Equity:
The above figure provides information about the sector asset allocation that has been
conducted by the Schroder Core UK Equity. The maximum allocation of the fund is mainly
conducted in Consumer services with an investment of 18% of the portfolio value. The second
highest investment is conducted on Financials with an investment of 17.5% (Schroders.com

8INVESTMENT ANALYSIS
2019). The other investments are relevantly conducted in health care, industrials, consumer
goods, basic materials, telecommunications, utilities, technology, and liquid assets. The
minimum allocation has been conducted in liquid assets and technology, as depicted in the above
figure. The main aim of the fund is to alter the investments to suit the risk, return criteria, and
generate adequate return from the exposer in the equity market.
d) Charges:
iShare-100-UK-Equity-Index-fund:
The overall fees and changes of iShare-100-UK-Equity-Index-fund are mainly depicted
in the above figure. Theses charge are the main cost that needs to be incurred by the investors to
continue their investment in the fund. In addition, the maximum initial charge that is needed by
the fund is 5% of the total amount that would be invested in the fund. Furthermore, the there is
no exit fess changed by the fund, which eases the process of the investors to exit the investment,
as and when they fit. However, an ongoing charge of 0.51% on the total investment values needs
to be paid by the investor to the fund manager (Blackrock.com 2019). The fund manager for
adequately conducting the relevant investments, which can generate higher returns to the
investors, mainly provides these charges.
Schroder Core UK Equity:

9INVESTMENT ANALYSIS
The above charges are depicted for Schroder Core UK Equity Fund, which needs to be
provided by the investors. There are no charges for new entry, where the new investors that want
to conduct relevant investments in the new fund can freely join the investment fund. On the other
hand, the ongoing charges of the fund are mainly at the levels of 1.43%, which needs to be borne
by the investor for investing in the fund. This fixed cost of investment needs to be provided by
the investment regardless of the income or loss incurred during the investment period
(Schroders.com 2019).
e) Investment performance compared to another fund and benchmark:
Particulars iShare-100-UK Schroder Core UK Equity
Beta 1.01 0.99
Sharpe Ratio -4.95% -10.94%
Treynor Ratio -0.16% -0.36%
M-Squared 0.32% 0.14%
Jensen’s Alpha 0.31% 0.10%
Average return 0.46% 0.27%
The above table provides information on the iShare-100-UK-Equity-Index-fund and
Schroder Core UK Equity, which comprising its overall\ returns with each other. From the above
table, it could be identified that the beta level of both funds is relevantly similar in nature, where

10INVESTMENT ANALYSIS
the beta of iShare-100-UK-Equity-Index-fund is at 1.01, while Schroder Core UK Equity value
is 0.99. However, from the relevant evaluation, it can be detected that the Sharpe ratio and
Treynor ratio of both funds in negative. Furthermore, the Jensen’s alpha of iShare-100-UK is
higher than Schroder Core UK Equity (Blackrock.com 2019).
9/30/2014
12/9/2014
2/17/2015
4/28/2015
7/7/2015
9/15/2015
11/24/2015
2/2/2016
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-0.1
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1
Return of FTSE 100 and Schroder Fund
Return (Schroder Core UK Equity) Return (FTSE I)
Figure 1: Return of FTSE 100 and Schroder Core UK Equity
(Source: As created by the author)

11INVESTMENT ANALYSIS
9/30/2014
12/9/2014
2/17/2015
4/28/2015
7/7/2015
9/15/2015
11/24/2015
2/2/2016
4/12/2016
6/21/2016
8/30/2016
11/8/2016
1/17/2017
3/28/2017
6/6/2017
8/15/2017
10/24/2017
1/2/2018
3/13/2018
5/22/2018
7/31/2018
10/9/2018
12/18/2018
2/26/2019
-0.1
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1
Return of FTSE-100 and i-Share-100
Return (iShare-100-UK) Return (FTSE I)
Figure 2: Return of FTSE 100 and iShare-100-UK
(Source: As created by the author)
The above graph indicates that the both funds’ performance higher than the FTSE-100,
which indicates that the fund managers were able to beat the market and generate higher returns.
However, the inclusion of certain expenses leads to the decline in actual returns, which reduces
the possibility of the firm to outperform the market.