Fund Spotlight: a way to play value being back in vogue

The second half of 2025 has begun with a continuation of tariff headlines and US trade policy dominating the news flow in global markets. The uncertainty surrounding this has certainly put the breaks on global growth stocks, which have had a muted return of 0.89% (GBP terms) year-to-date. Their global value counterparts have returned 3.4% (GBP terms) and bucked a trend in recent years of underperforming growth stocks.

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Now might be a time to consider the outlook for value stocks going forwards if this trend is to continue. Looking at valuations, there’s certainly further room for value stocks to catch up. The MSCI Growth index is trading on a far higher price-to-earnings (p/e) ratio of 28.8 compared with the MSCI Value index’s 15.6, meaning the valuation gap is wide relative to historical levels.

The Schroder Global Sustainable Value Equity fund is a global value strategy that we rate highly. It was also one of the first UK funds to successfully apply a Sustainability label (SDR) of “Sustainability Focus” by the Financial Conduct Authority, validating its sustainable credentials.

The objective of the fund is to provide capital growth ahead of the MSCI World index over a three- to five-year period. The fund has been managed by the trio of Simon Adler, Liam Nunn, and Roberta Barr since its launch in mid-August 2021. Both Adler and Nunn have extensive experience within this team dating back to 2016 and 2019 respectively. This team operate within the wider global value team at Schroders, which is well regarded.

What does the fund invest in?

The fund invests in large well-established companies across global developed markets which management view as trading at significant discounts to their fair values, but also demonstrate sustainable characteristics. These are companies that, through the way they are managed and through the goods and services that they sell, make a positive contribution to the environment and to stakeholders.

The process begins with valuation screens, which reduces the investable universe to a manageable number of stocks. Environmental, social and governance (ESG) analysis follows, meaning there is no compromise on the desired valuation characteristics.

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Management target stocks significantly undervalued by the market. This is evident by the portfolio’s current p/e ratio of 10.4, relative to the average p/e ratio of the fund’s Global Large-Cap Value peer funds of 13.2, therefore positioning this fund as a deep-value strategy.

The portfolio typically consists of 30 to 70 companies (currently 42) and is required to invest at least 70% in assets that the management team classifies as sustainable. The criteria will inevitably introduce some sector biases, but over the long run, the stock-specific valuation opportunities are expected to drive performance.

With investments driven by the best value opportunities and sustainability related considerations, deviations from the MSCI All Country World Index benchmark can be sizeable. The resulting portfolio is a relatively concentrated one, with 31% of the portfolio allocated to the top 10 holdings.

The allocation to the UK is currently 25.4%, making it the largest overweight position (+21.8 % versus the MSCI World benchmark). At 17.1%, Japan is also a large overweight (+11.7% vs MSCI World), which reflects the view of management that there are significant value opportunities prevalent in these countries.

The US remains the largest underweight position (-39.2% vs MSCI World) given the premium of the overall market. However, the team are confident that value opportunities do remain in this market, hence it remains the largest allocation at 32.6%.

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At the sector level, communication services represent the largest overweight position. Two of the top 10 holdings come from this sector including BT Group (LSE:BT.A) and Verizon Communications Inc (NYSE:VZ).

In Q1 of this year, management remained active, adding two new holdings to the portfolio: UK REIT British Land Co (LSE:BLND) and Aptiv (NYSE:APTV), the global technology business.

The position in SES SA DR (EURONEXT:SESG), the Luxembourg-based satellite business was exited on sustainability grounds. It had become clear that its planned acquisition of Intelsat would pivot the business to the defence sector.

How has the fund performed?

This fund has been a reliable performer in the global value space. Over the past five years, returns have been strong (11.3% annualised) outperforming peers by 1.2 percentage points. Being value‑oriented, with lower exposure to mega-cap US tech, investors should be aware that this fund doesn’t participate in high-growth rallies from tech dominance (e.g. “Magnificent Seven”), leading to underperformance versus the MSCI World during those cycles. However, the comparison to this index is less relevant given how differentiated the fund is to this benchmark.

In the past year, impressive stock selection, particularly in undervalued sustainable firms, drove the fund's outperformance. Top performers came from a mix of telecoms (Verizon, BT) a bank (Standard Chartered (LSE:STAN)) a consumer goods firm (Henkel AG & Co KGaA (XETRA:HEN)) and a pharma company (GSK (LSE:GSK)).

Source: Morningstar Total Returns (GBP) to 30/06/2025.  Past performance is not a guide to future performance.

Why do we recommend this fund?

This fund benefits from a highly experienced and well-resourced global value team at Schroders. The result is a globally diversified portfolio of some of the cheapest companies in the world that demonstrate a high degree of sustainability.

While valuations are still elevated in many growth areas of the market, value stocks, especially outside the US, continue to trade at a discount relative to historical norms, which provides a broad opportunity set for the management team to take advantage of.

With economic growth uneven globally, and the outcome of the current trade war yet to be determined, it could be a good time to re-consider your allocation to value strategies in your portfolio, as they tend to perform well in periods of market weakness and bouts of inflation.

This fund can be used by investors as a complement to growth strategies within an already diversified portfolio. It will add balance to growth-oriented funds and represents a strong, sustainably focused global value option.

This fund is available with a yearly fee of 0.91% and is one of ii’s ACE 40 investment ideas.

Please find the latest factsheet here.