Schroder Income Class L - Accumulation (GBP)

The fund has a distinct value style bias and the contrarian approach employed means it can look quite different to the index at times. The contrarian nature of this approach means that investors need to adopt a long-term view as there will be times when the fund's style will be out of favour and the fund could underperform. We think Murphy and Evans have the experience and support to deliver good long-term returns to patient investors, although there are no guarantees.

The fund aims to provide income and capital growth over the long term by investing in a diversified portfolio of UK companies. The fund has a distinct value style bias and the contrarian approach employed means it can look quite different to the index at times.

The process begins with valuation screens designed to identify companies that have experienced large share-price falls or falling profits. The manager's aim to remove the impact of the economic cycle by looking at measures like share price relative to a companys average earnings over 10 years. This helps them condense the investable universe to focus on the cheapest stocks. This focus on out-of-favour companies is called value investing.

The manager's then perform detailed research on companies that have screened well with the aim of weeding out those that are value traps - companies that are cheap for good reason. This research process involves building financial models, identifying key drivers of the business and assessing its balance sheet strength. The managers will also look to normalise key measures of a company's success like revenues, margins and returns over time rather than just looking at one point in the cycle.

A company's income generation profile is considered throughout the process. The managers don't just consider the current dividend a company pays, but also the potential for that dividend to grow and a company's ability to grow its capital value in order to support that income growth over time.

Stocks with attractive risk / reward ratios are purchased with positions sized according to the managers' assessment of the risks involved, with the larger positions in those with lower risks.