HEAD-TO-HEAD: Blackrock vs Schroders

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Investment strategy

Both the Blackrock and Schroders funds invest in global energy equities. However, there are differences in their investment strategies, with one fund buying a broader range of stocks and the other targeting a concentrated portfolio, according to Ng.

For benchmarks, the Blackrock product uses the MSCI 10/40 DW Energy (Net) Index and the Schroders fund uses the MSCI World Energy Sector Net TR Index.

The Blackrock fund deploys both top-down and bottom-up stock selection.

“The broader natural resources team at the firm provides an in-house projection of demand and supply in the energy sector and targets for commodity prices. The fund managers will then take into account the macro situation when making investment decisions.”

The team also emphasises bottom-up analysis through site visits and research on the business operations.

Of the two products, the Blackrock fund holds a broader range of large cap stocks, which forms a more balanced portfolio, according to Ng. The fund typically holds around 40-70 stocks.

In addition, the fund managers prefer large cap stocks (market cap over $10bn), which account for nearly all the equity allocation in the fund.

Turning to the Schroders fund, the team aims to maintain a concentrated portfolio of no more than 50 stocks. At the end of May, the fund had 41 of holdings, according to its factsheet.

The fund’s investment strategy is purely bottom up-driven, according to Ng.

‘The team shortlists around 100 companies, based on the benchmark index constituents, for further qualitative analysis,” he said.

“In addition to individual company fundamentals, the bottom-up analysis also covers the company’s relationship with other market players because the team believes strategic alliances in the energy and resources sector are important.”

The Schroders portfolio also tends to hold more small caps (market cap less than $1b), representing around 12% of assets.

Both funds have a heavy exposure to the upstream segment, which includes the exploration and production businesses.

The exposure makes the funds more sensitive to the price movements of crude oil, according to Ng. Over a three-year period, the Schroders fund has had a 0.83 correlation with the Brent crude oil price and Blackrock has had a 0.75 correlation.

“Of the two funds, the Schroders fund currently takes a more aggressive overweight in the upstream business. Compared to its benchmark index, the fund reported a 28.3% overweighting,” he said.

Allocation 

Source: Fund factsheets

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