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Oil prices hit Schroder UK Mid Cap

Over the year to the end of September 2015, Schroder UK Mid Cap Fund’s net asset value produced a total return of 8.2%, compared to a total return of 12.7% for its benchmark, the FTSE 250 (ex-Investment Companies) Index. The share price produced a total return of 5.0%. The full year dividend increased 8.2% to 9.2p.

Rosemary Banyard’s manager’s report says the failure to keep up with a strong benchmark last year was primarily attributable to a handful of oil exploration and production, and oil services investments, notably Premier Oil, SOCO International, EnQuest and Lamprell. Collectively they did not represent a significant proportion of total assets, but were very badly hit by the near halving of oil prices in a year. The combination of a slowing Chinese economy, efficiency improvements in US shale production, and the decision by Saudi Arabia to maintain output at lower prices, thereby ceasing to be the world’s swing producer, exposed these companies and their high levels of operational gearing.

On a more positive note, two significant contributors last year in the industrial space received trade bids, Domino Printing Sciences from Japan and Alent from the US. In a deflationary world, companies with pricing power arising from strong market positioning also performed well, such as Redrow (housebuilder), Rightmove (property portal) and Dignity (funeral services).

SCP : Oil prices hit Schroder UK Mid Cap

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