Key Morningstar Metrics for Schroder European Recovery fund
- : NeutralMorningstar Medalist Rating
- : Above AverageProcess Pillar
- : AveragePeople Pillar
- : Above AverageParent Pillar
Andy Evans, former comanager of Schroder European Recovery, left Schroders in mid-June 2025. The fund is now managed solely by Andrew Lyddon. The deeper-value approach to Europe ex-UK equities is robust, and Lyddon can lean on others in this collegiate team. We maintain a People rating of Average and a Process rating of Above Average.
Before June 2025, a comanager structure was in place. Lyddon and Evans, from the Schroder global value team, took on the strategy in May 2018. They had also managed the Schroder ISF European Value fund since 2016. Both mandates are now managed by Lyddon alone. This is yet another change to team responsibilities, following the unwelcome departure of longtime co-team leads Kevin Murphy in June 2024 and Nick Kirrage in July 2025. That follows other changes in responsibilities in late 2022, when Lyddon took on comanagement of the Schroder Recovery fund. There has now been a rearrangement of responsibilities in 2022, 2024, and 2025. We think this is manageable for Lyddon, whom we think highly of, but we remain vigilant that the team’s efforts in Europe are not being diluted; we need to see stability now. Reassuringly, the team has made several experienced hires, including Graham Shircore and Steve Woolley, with 20 and 17 years of industry experience, respectively.
Screening still appears to be more important in the European and global versions of the team’s approach than in the UK strategy, but the overall process is identical. Ideas in terms of holdings and sector biases, which can at times be prominent, are similar to other strategies run by the team. There is close collaboration between team members. It is still the portfolio managers who put their stamp on the strategy and are ultimately responsible. The opportunity set they encounter during different times in the market cycle means the market-cap profile can shift. A small/mid-cap bias should be expected, and this is where Lyddon has found the most ideas recently.
This has become further accentuated in recent years, with flatter portfolios now targeted following consultation with Cabot, to account for ergodicity. In theory, this should help improve long-term returns. Time will tell whether flatter portfolios will accentuate the effect of mistakes, given that risk scores now have less bearing on position sizing. These should be more than compensated for by the winners.
Schroder European Recovery fund: Performance Highlights
Since the value approach changed in June 2018 to the end of May 2026, the fund is ahead of the category and modestly ahead of the category index. It has not been a smooth journey, and volatility can be high. The drawdown in 2020 was painful. Returns have been influenced by strong value bias, pushing this strategy to one of the deepest-value points across our universe. The small-cap bias has also hurt at times, though stock picks in this space have, in aggregate, been decent when adjusting for style.
The strategy has tended to perform well when we expect it to—that is, when value is in vogue. The contrarian value approach is evident, and positions in out-of-favor sectors like energy and financials (for example, in the Netherlands) are aligned with subsequent market rotations. Through the pandemic period, the focus on companies that experienced operational setbacks but could benefit from self-help, with safety provided by robust balance sheets, set the fund up for strong performance afterward.
2025 was a strong year for this strategy, comfortably outperforming both the category index and its peers; its performance was supported by strong stock selection among French stocks and within the consumer cyclical sector.
Over the trailing five years to end-May 2026, including the fund’s very strong 2022, it is comfortably ahead of the category index and category average, despite the underweighting in growth and being overweight in small- and mid-cap value stocks. Country-wise, Switzerland shows as poor in terms of stock selection owing to Credit Suisse and GAM. We note that many other financials holdings have contributed positively.
Overall, the contrarian and unconstrained nature of the approach often sees the fund invest in truly unloved and cheap areas of the market; often, these investments are deemed lower quality by the market or are cyclical in nature. They can take time to rerate. There can be mistakes, too. Compared with the category index, it will tend to do poorly when the market rewards quality growth.
Investors are encouraged to adopt a long-term approach when utilizing this strategy, as it may take time for benefits to be passed on from this deeply contrarian portfolio.
