HEAD-TO-HEAD: Invesco versus Schroders

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Conclusion

Morningstar’s silver rating award for the Schroders fund reflects the firm’s high regard for its ability to outperform its peers throughout the full five-year market cycle. The five stars attributed to the fund represent Morningstar’s assessment that it “is high return, below average risk”. The view is reinforced by a Sharpe ratio (a measure of risk-adjusted returns) of 1.6.

“The Schroder ISF Greater China Fund rates highly for all our five key pillars: process, performance, people, parent and price,” said Share.

Morningstar is also impressed with the historical risk and return profile of the Invesco fund, awarding the fund four stars and a bronze rating. But Share is concerned about the recent management changes and their potential to affect future performance.

“Moreover, investors have to decide whether in these unstable times, with the impact of an extended Sino-US trade dispute likely to be especially acute for the Greater China markets, they are prepared to take on more risk than the benchmark,” said Share.

“The Invesco fund deviates far more from the [MSCI Golden Dragon] Index, with massive outsized bets in consumer discretionary stocks and almost nothing in steadier, dividend-paying financials.”

“The Schroders fund is more closely aligned with the benchmark, has a proven track record of success and we have a great deal of confidence in its lead manager and her team,” said Share.

“Whatever fund they choose, investors should let the fund do its work and avoid the temptation to churn if markets get tough,” she added.

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