Jones (pictured) manages the Schroder US Mid Cap and the Schroder US Smaller Companies funds, which have both lagged behnd their benchmark over one, three and five years. The manager says that one of the main reasons for this is that she missed out on the rebound of banks and insurance companies after the 2008 financial crash.
"In the downturn and especially in the small cap space, financials were hit very hard," she explained. "However, they have rebounded and held up extremely well, especially banks and certain areas of insurance."
"Areas like consumer finance were hit significantly and were down around 90 per cent after the crash, but we have seen huge appreciation since."
"Unfortunately I missed a few opportunities and didn’t buy enough in financials when they bounced back. As a stockpicker I think it has been a very tough market to find quality in, but there were certain opportunities that I missed out on," she added.
Performance of fund vs indices over 5-yrs
| Name | 1yr returns (%) |
3yr returns (%) | 5yr returns (%) |
|---|---|---|---|
| Schroder - US Mid Cap | 9.01 | 31.01 | 45.22 |
| Russell 2500 | 15.38 | 44.47 | 60.35 |
| Schroder - US Smaller Companies | 10.55 | 33.35 | 44.74 |
| Russell 2000 | 14 | 39.96 | 55.37 |
Source: FE Analytics
FE data shows that financials make up 17.5 per cent of Jones’ £774m Schroder US Mid Cap fund's total assets, its highest sector exposure.
However, it is underweight compared with the Russell 2500 benchmark, which has a 24.8 per cent weighting.
The £455m Schroder US Smaller Companies fund is also considerably underweight financial services.
Jones points to the recent popularity of income-generative stocks as another big driver of her underperformance.
"We like growth plays and especially self-generative or organic businesses," she said.
"REITs [real estate investment trusts] have done very well recently but we are considerably underweight in the sector."
"They have a tax-advantage status where they have to pay out 80 per cent of their cash-flow in dividends. We don’t think they are transparent enough and though they have performed strongly, we like self-generative companies."
Although Jones has had a turbulent last few years, she has a successful long-term track record.
According to FE Analytics, her US Mid Cap fund has beaten both the IMA North America sector and the Russell 2500 index since she took charge in the spring of 2005.
Performance of fund vs sector since April 2005
Source: FE Analytics
She has been manager of the Schroder US Smaller Companies fund since 2002 and over that time it is the best-performing fund in the IMA North American Smaller Companies, with returns of 182.45 per cent.
The Russell 2000 index and the sector have returned 152.31 per cent and 147.53 per cent over this time, respectively.
Jones says the macroeconomic uncertainty has made it very difficult for managers to add value in recent years.
"There has been a high correlation among industries, which has been very frustrating," she explained.
"People tend to ignore smaller companies when times are tough, so large caps have outperformed. Although small caps have picked up recently, it was because investors have focused on domestic companies as they have been nervous about the global economy."
"However, I don’t know how sustainable this rally is as investors will inevitably look for a more international focus."
"What I don’t do is forecast the economy or predict opportunities in the future: I just try to compare the valuations of my market against the large cap sector."
Both of Jones’ funds have a total expense ratio (TER) of 1.66 per cent and require a minimum investment of £1,000.
The Mid Cap fund is officially soft-closed, but anyone willing to pay the 2.25 per cent initial charge can still gain access to it.