Schroders' Sym: Investors beware of the 'phenomenon' of cost inflation

Outperformers of last five years likely to struggle

Schroders' James Sym, manager of the £1.2bn European Alpha Income fund, has warned the investment universe is "facing a phenomenon it has not seen for a decade" as 'cost inflation' kicks in, with funds that have done well from the low-inflation environment over the past five years likely to struggle.

Sym, who has run the fund since 2012, has been bolstering the portfolio's allocation to "cheap, unloved sectors" over the past couple of years, focusing on financials, telecoms and oil and gas on the view companies in other sectors will struggle to grow in the face of cost inflation. The growth of European companies' profits has been sluggish in the manufacturing and services sectors this year, not due to a lack of demand as seen between 2009 and 2016, but because of the rising costs of capital inputs and labour, Sym explained. Schroders manager Steve Cordell to leave firm "Most co...