Key Morningstar Metrics for Schroder European Fund
- : SilverMorningstar Medalist Rating
- : Above AverageProcess Pillar
- : Above AveragePeople Pillar
- : Above AverageParent Pillar
Schroder European continues to offer investors a lot of attractive features, namely a well-experienced manager backed by a large team and a clearly articulated process. As a result, we maintain People and Process Pillars at Above Average.
Lead manager Martin Skanberg has been in place here since 2006 and brings over three decades of experience in European equities. He is supported by a large analyst team that has been 10–13-members-strong over the past few years, with average experience levels in the midteens. Turnover has been somewhat of a perennial issue, and particularly more-junior analysts have left. However, at least for now, we have seen more stability at the more-senior end. In any case, our conviction rests in the ability of Skanberg to turn the analysts’ bottom-up work into effective idea generation, which is not in doubt, and resourcing remains strong.
The process aims to be style-agnostic, although Skanberg is specific in targeting a combination of valuation anomalies where the market has underestimated growth or margins or names at inflection points. He will then tilt the portfolio based on where the analysts have best ideas but also on sector views synthesized from bottom-up work. Valuations lead the process in terms of screens and developing fundamental views, but it isn’t a particularly “value” approach, keeping a consistent allocation to high-growth stocks if they look cheap versus potential. The edge has previously been credited as Skanberg being able to get the most out of his team as well as its resourcing and experience levels, and this continues to be the case. We have also seen Skanberg implement this process consistently for two decades and being willing to follow the process where it takes him, even if the position is against the grain.
Performance had been strong over the early years of the strategy’s life under Skanberg, and we have seen long-term results that are comfortably ahead of the benchmark and peers. However, a notable overweighting to mid-cap value dragged on performance over 2021-23, and while stock selection was positive when accounting for this bias, there were stock-specific mistakes. Viaplay was a major detractor over 2022 and 2023, falling on concerns over subscribed growth; Kion was a major detractor over 2022 on concerns about its business model; and Neste and Umicore were big detractors over 2021 when they fell on the back of poor operational performance and falling guidance. However, there was somewhat of a return to form over the following period, with strong contributions from banks and aerospace and defense stocks. Overall stock selection tends to be the strongest driver of long-term returns, as the benchmark-conscious approach to portfolio management tries to avoid too much top-down risk.
Schroder European Fund: Performance Highlights
The long-term track record under Martin Skanberg has been impressive, with returns well ahead of peers and the benchmark over his stewardship. Stock selection has been the most prominent driver of performance, but at times, stylistic positioning has been a major drag (notably 2021-23, with mid-cap value underperforming). When we correct for the style headwinds, we see that stock selection has generally been strong throughout as the primary driver of returns. Broadly, it has been through bull runs where Skanberg has managed to capture more of the upside, but this is meant to be a go-anywhere approach as opposed to being momentum-driven. The considerable underperformance we saw, which was led by the overweighting to mid-cap value, was followed with strong years over 2024, with strong stock selection in large-cap names such as Siemens Energy and SAP paying off strongly. This has been followed by a compelling 2025 (through Nov. 30), with notable contributions from the aerospace and defense sectors; Hensoldt, Iveco, and Airbus all performed particularly well. We also saw decent contribution from banks, albeit sensibly reducing their position on the strong share price performance.
