The site you are about to enter is intended for Australian wholesale clients only (as that term is defined in section 761G of the Corporations Act 2001 (Cth)) and is not intended for distribution to, nor should it be relied upon by, retail clients. Newton Investment Management Limited (Newton) is authorised and regulated in the UK by the Financial Conduct Authority (FCA). Newton is providing financial services to wholesale clients in Australia in reliance on ASIC Corporations (Repeal and Transitional) Instrument 2016/396, a copy of which is on the website of the Australian Securities and Investments Commission, www.asic.gov.au. The Instrument exempts entities that are authorised and regulated in the UK by the FCA, such as Newton, from the need to hold an Australian financial services license under the Corporations Act 2001 for certain financial services provided to Australian wholesale clients on certain conditions. Financial services provided by Newton are regulated by the FCA under the laws and regulatory requirements of the United Kingdom, which are different to the laws applying in Australia. This information is made available by Newton Investment Management Limited and BNY Mellon Investment Management Australia Ltd (AFSL 227865).
By using this website I also confirm that: I accept the Terms of Use and I agree to comply with them – View our Important information I accept the BNY Mellon Privacy Notice and I agree to comply with it – View the BNY Mellon Privacy Notice I accept and consent to the use of cookies and analytics – View our Cookie Policy
The financial sector has come to dominate the real economy, which creates systemic risk. How do we incorporate this knowledge into our analysis?
A finance frenzy
The scale, complexity and interconnectedness of global financial markets has mushroomed with modern financial architecture increasingly built on complex financial instruments that depend on liquid and continuous markets. Further impetus has come from inflationary monetary policies and the dominant central-bank belief in not leaning against financial excess.
The growth of the financial economy has outpaced that of the non-financial economy, creating an unbalanced system ripe for corruption and distrust. The scale of global finance remains much as it was in the run-up to the 2007-8 credit crisis and remains a source of systemic risk.
Our financial focuses
We tend to examine our financialisation theme through the lens of the world’s soaring levels of debt, the inflation of asset prices, and the liquidity risk still present across the world after the global financial crisis. This shift in the financial sector and its implications for the rest of the world’s industries and governments are worth keeping front of mind as we aim to use the instruments and companies in this area to generate returns.
Our key areas of focus
Debt burden
A series of developments have reduced the constraints on the world’s financial system to create debt and credit. These include the abandonment of the gold standard (which linked the value of paper money directly to gold), increased adoption of inflation-targeting central banking, a structural decline in interest rates, and the globalisation of finance. This has led to a structural increase in debt relative to income (GDP), leading to greater financial vulnerability.
Asset inflation
Monetary intervention and credit inflation has underpinned an inflation of asset prices (financial and non-financial). Returns from asset prices have outpaced income growth, leaving them particularly vulnerable to changes in economic/market conditions.
Liquidity risk
The functions of a global reserve currency are paramount to the health of the global economy. A global reserve currency, by definition, has to be reasonably and efficiently accessible in all parts of the world. Prior to the 2007-8 financial crisis, the private-sector financial system ensured this was the case. The experience of the post-crisis period indicates that the financial crisis marked a structural break in the operating of the global financial system. While the crisis is over, global liquidity now ebbs and flows, and with it the availability of US dollars. A deterioration of dollar liquidity leads to economic and market weakness and vice versa.
Of course, our themes don’t exist in a vacuum
Financialisation has been made possible by technological advancements and our increasingly connected world. Our net effects theme considers the profound implications of increased connectivity for a host of industries.
State intervention has played a key role in the financialisation of the economy. What other effects does state intervention have on the investment landscape?
Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.
These opinions should not be construed as investment or other advice and are subject to change. This material is for information purposes only. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell investments in those countries or sectors. Please note that holdings and positioning are subject to change without notice.
Individual Investors will be redirected to bnymellon.com
This is a financial promotion. Issued by Newton Investment Management Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England No. 01371973. Newton Investment Management is authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN and is a subsidiary of The Bank of New York Mellon Corporation. Newton is providing financial services to wholesale clients in Australia in reliance on ASIC Class Order 03/1099, a copy of which is on the website of the Australian Securities and Investments Commission, www.asic.gov.au. The Class Order exempts entities that are authorised and regulated in the UK by the FCA, such as Newton, from the need to hold an Australian financial services license under the Corporations Act 2001 for certain financial services provided to Australian wholesale clients on certain conditions. Financial services provided by Newton are regulated by the FCA under the laws and regulatory requirements of the United Kingdom, which are different to the laws applying in Australia.
Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only. Past performance is not a guide to future performance. Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.
This material is for Australian wholesale clients only and is not intended for distribution to, nor should it be relied upon by, retail clients. This information has not been prepared to take into account the investment objectives, financial objectives or particular needs of any particular person. Before making an investment decision you should carefully consider, with or without the assistance of a financial adviser, whether such an investment strategy is appropriate in light of your particular investment needs, objectives and financial circumstances.
This information is made available by Newton and BNY Mellon Investment Management Australia Ltd (AFSL 227865). This information is confidential and is only provided to Australian wholesale clients (as that term is defined in section 761G of the Corporations Act 2001 (Cth)). This is not an offering or the solicitation of an offer to purchase an interest in any financial product referred to in this website. This content is for general purposes only and should not be relied upon as financial product advice. This content has been prepared without taking into account the objectives, financial situation or needs of any person. Before making an investment decision an investor should consider the appropriateness of the information in this website having regard to these matters and read the disclosure document relating to a financial product. Investors should also consider obtaining independent advice before making any investment decisions. Investments can go up and down and to the extent that this website contains any past performance information, past performance is not a reliable indicator of the future performance of the relevant investment or any similar investment strategy.
Newton Investment Management Limited is exempt from the requirement to hold an Australian financial services licence in respect of the financial services it provides to wholesale clients in Australia and is authorised and regulated by the Financial Conduct Authority of the UK under UK laws, which differ from Australian laws.
The scale, complexity and interconnectedness of global financial markets has mushroomed with modern financial architecture increasingly built on complex financial instruments that depend on liquid and continuous markets. Further impetus has come from inflationary monetary policies and the dominant central-bank belief in not leaning against financial excess.
