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About Newton

Newton’s story is one of purpose – to improve people’s lives by investing in a way that strives to deliver attractive outcomes to our clients and to help foster a healthy and vibrant world for all.

This strategy is offered by Newton Investment Management Ltd (‘NIM’). NIM is part of the Newton Investment Management Group.

Our Philosophy and Process

  • The strategy has a simple structure, with a stable core of predominantly traditional return-seeking assets, and a layer of risk-offsetting positions which aim to dampen volatility and preserve capital. Material ESG risks, opportunities and issues are considered as part of the investment research process.
  • The strategy is conviction-based, with no regional, sector or performance reference constraints. A constantly evolving and forward-looking approach seeks to anticipate change, manage risk, and identify opportunities.

Every time we consider a security or look at an industry or country, it’s in the context of what’s happening across the world. We believe the investment landscape is shaped over the long term by some key trends, and we use a range of global investment themes to capture these.

Smart revolution

Machines and networks are becoming more intelligent. This is disrupting the labour market, as machines increasingly replace humans in the workplace. ‘Smart revolution’ considers the implications commercially, socially and politically.

State intervention

Authorities have engaged in ever-greater policy intervention and regulation to shore up economic growth. We believe ‘state intervention’ has increased misallocation of capital, caused volatility in markets and inflated asset prices – and we think that calls for a stock-specific approach.

Financialization

Cheap money has caused rapid growth in a sector already supported by deregulation. ‘Financialization’ investigates the implications of finance dominating economic activity, instead of serving it.

Transcript

The investment landscape looks challenging. We think policies being pursued may be making economies and markets more fragile. So what should you do as an investor? One solution could be our Real Return strategy.

You can imagine the portfolio like this:

At the core, the emphasis is on traditional assets to generate capital growth and drive long-term returns.

Then there is an outer layer – stabilizing assets and hedging positions to try to counteract risks and dampen volatility.

And this is how we construct it:

In the core, might be equities, infrastructure and renewables.

In the outer layer we use a diverse range of instruments, including commodities, bonds, simple derivative strategies and currencies.

We alter the proportions of the core and outer layer according to our evolving view on the investment landscape.

We think there’s a key advantage to active management. We can seek out returns in rising markets and try to minimize the downfall in falling markets.

Its composition is guided by the perspective of our global investment themes. They are our interpretation of the forces driving long-term change in the world.

Our Real Return strategy takes a simple, transparent approach to try to deliver, solid, stable returns for our clients.

Investment Team

Our Global Real Return strategy is managed by an experienced team with a wide range of backgrounds. Our investment team of research analysts and portfolio managers works together across regions and sectors, helping to ensure that our investment process is highly flexible. Guided by our global investment themes, we seek to identify opportunities and risks through research and debate.

20
years’ average investment experience
14
years’ average time at Newton

Strategy Profile

Objective

The strategy aims to deliver a total return of SOFR (30-day compounded) +4% per annum over 5 rolling 5-year periods, from a globally diversified portfolio. In doing so, the strategy aims to achieve a positive return on a rolling 3-year basis. However, a positive return is not guaranteed and a capital loss may occur.

Performance benchmark

SOFR (30-day compounded) +4%*

*Please note that on November 1, 2021, the performance benchmark for this strategy changed from 1-month USD LIBOR +4% to SOFR (30-day compounded) +4%.

Volatility

Expected to be between that of bonds and equities over the long term

Strategy size

C$19.5bn (as at June 30, 2022), including GBP, EUR, USD and AUD strategies

Strategy inception

Composite inception: July 1, 2009 (USD strategy); April 1, 2004 (GBP strategy)

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.

ESG analysis may vary depending on the type of security, investment rationale and investment strategy. Newton does not currently view certain types of investments as presenting ESG risks, opportunities and/or issues, and believes it is not practicable to evaluate such risks, opportunities and/or issues for certain other investments. In addition, Newton will make investment decisions that are not based solely on ESG considerations. In some cases, therefore, Newton may conclude that other attributes of an investment outweigh ESG considerations when making investment decisions.

Key Investment Risks

  • Performance Aim Risk: The performance aim is not a guarantee, may not be achieved and a capital loss may occur. Strategies which have a higher performance aim generally take more risk to achieve this and so have a greater potential for returns to vary significantly.
  • Currency Risk: This strategy invests in international markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • Derivatives Risk: Derivatives are highly sensitive to changes in the value of the asset from which their value is derived. A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. This can increase the sizes of losses and gains, causing the value of your investment to fluctuate. When using derivatives, the strategy can lose significantly more than the amount it has invested in derivatives.
  • Changes in Interest Rates & Inflation Risk: Investments in bonds/money market securities are affected by interest rates and inflation trends which may negatively affect the value of the strategy.
  • Credit Ratings and Unrated Securities Risk: Bonds with a low credit rating or unrated bonds have a greater risk of default. These investments may negatively affect the value of the strategy.
  • Credit Risk: The issuer of a security held by the strategy may not pay income or repay capital to the strategy when due.
  • Emerging Markets Risk: Emerging Markets have additional risks due to less-developed market practices.
  • Liquidity Risk: The strategy may not always find another party willing to purchase an asset that the strategy wants to sell which could impact the strategy’s ability to sell the asset or to sell the asset at its current value.
  • Shanghai-Hong Kong Stock Connect and/or the Shenzhen-Hong Kong Stock Connect (‘Stock Connect’) risk: The strategy may invest in China A shares through Stock Connect programs. These may be subject to regulatory changes and quota limitations. An operational constraint such as a suspension in trading could negatively affect the strategy’s ability to achieve its investment objective.
  • CoCos Risk: Contingent convertible securities (CoCos) convert from debt to equity when the issuer’s capital drops below a pre-defined level. This may result in the security converting into equities at a discounted share price, the value of the security being written down, temporarily or permanently, and/or coupon payments ceasing or being deferred.
  • Counterparty Risk: The insolvency of any institutions providing services such as custody of assets or acting as a counterparty to derivatives or other contractual arrangements, may expose the strategy to financial loss.
  • Investment in Infrastructure Companies Risk: The value of investments in Infrastructure Companies may be negatively impacted by changes in the regulatory, economic or political environment in which they operate.

This strategy is offered by Newton Investment Management North America LLC (‘NIMNA’) in the United States. NIMNA is part of the Newton Investment Management Group.

Strategy Overview

The combination of growth and value disciplines can minimize any potential bias and is designed to produce more consistent investment performance over time. Our results are driven by fundamental, bottom-up research that is designed to add value primarily through industry and security selection. Consistency is further enhanced by well-defined investment and risk-management processes that seek to reduce the potential for unintended risk.

Investment Team

Our investment team of research analysts and portfolio managers work together across regions and sectors, helping to ensure that our investment process is highly flexible.

23
years’ average investment experience
19
years’ average time at Newton

Strategy Profile

Benchmark

S&P 500® Index

The S&P 500® Index performance benchmark is used as a comparator for this strategy. Information about the indices shown here is provided to allow for comparison of the performance of the strategy to that of certain well-known and widely recognized indices. There is no representation that such index is an appropriate benchmark for such comparison.

Strategy inception

December 1, 2008

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 strategy is offered by Newton Investment Management North America LLC (‘NIMNA’) in the United States. NIMNA is part of the Newton Investment Management Group.

Strategy Overview

The strategy seeks to strike an attractive balance between portfolio risk and return over the long-term, targeting equity-like returns at a lower level of volatility over a full market cycle. Dynamic Total Return allocates across liquid global asset classes using a disciplined, systematic investment process based on bottom-up, fundamental valuations and top-down macroeconomic insights. The portfolio positions may be directional (embedding an underlying market beta) or diversifying market-neutral exposures.

Dynamic Total Return can serve a number of roles in a portfolio. With advanced de-risking methods designed to mitigate downside risk, it is suitable for those seeking to earn equity-like returns while reducing overall equity beta and mitigating extreme market drawdowns. Dynamic Total Return can also function as a core multi-asset exposure that seeks higher risk-adjusted total returns (i.e. Sharpe Ratio) than an all-equity strategy.

Investment Team

Strategy Profile

Strategy inception

May 01, 2006

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 strategy is offered by Newton Investment Management Ltd (‘NIM’). NIM is part of the Newton Investment Management Group.

Our philosophy and process

  • The strategy follows an unconstrained, highly dynamic asset-allocation approach within a broad universe of global bonds; it can invest in government bonds, emerging-market sovereigns, high-yield bonds and investment-grade corporate debt. The strategy has the flexibility to manage currency exposure actively to generate additional returns.
  • A constantly evolving and forward-looking approach seeks to anticipate change, manage risk, and identify opportunities. Material ESG risks, opportunities and issues are considered as part of the investment research process.

Every time we consider a security or look at an industry or country, it’s in the context of what’s happening across the world. We believe the investment landscape is shaped over the long term by some key trends, and we use a range of global investment themes to capture these.

State intervention

Authorities have engaged in ever-greater policy intervention and regulation to shore up economic growth. We believe ‘state intervention’ has increased misallocation of capital, caused volatility in markets and inflated asset prices – and we think that calls for a stock-specific approach.

Financialization

Cheap money has caused rapid growth in a sector already supported by deregulation. ‘Financialization’ investigates the implications of finance dominating economic activity, instead of serving it.

Transcript

The backdrop for bond investors looks uncertain. The 30-year bull market in bonds may have come to an end, and in its place could be volatile conditions.

In the years ahead, we anticipate marked divergence in the fortunes of regions, currencies and bond instruments.

So what should investors do?

A dynamic, unconstrained approach to bond investing could help maximize opportunities while trying to minimize risks.

One solution could be our Global Dynamic Bond strategy.

It uses a mixture of global fixed-income markets and some hedging techniques to achieve its absolute-return objective.

And it invests in a range of bond and currency markets to try to exploit divergence. So how does it work?

The strategy has a transparent, single portfolio of direct investments. The emphasis is on traditional fixed-income asset classes for simplicity and liquidity.

There are four key asset classes: government bonds, investment-grade corporate bonds, emerging- market sovereigns and high-yield corporate bonds.

They are selected based on what we see as their strong fundamentals, and are guided by the perspective of our global investment themes.

We balance the allocation to try and suit the economic cycle – whether that’s rising interest rates, defaults, devaluation or inflation.

Then we seek to dampen volatility and preserve capital by hedging interest rate and currency exposure. We invest in a range of markets including inflation-linked bonds, active currency positions and short-dated high-yield bonds.

Key to the strategy is flexibility, dynamic security and asset allocation.

We believe that’s vital in order to take advantage of the changing fortunes of bond and currency markets.

The Global Dynamic Bond strategy aims to capture market upside and preserve capital, in order to deliver long-term results for our clients.

Investment team

Our Global Dynamic Bond strategy is managed by a focused, experienced fixed-income team. Our investment team of research analysts and portfolio managers works together across regions and sectors, helping to ensure that our investment process is highly flexible. Guided by our global investment themes, we seek to identify opportunities and risks through research and debate.

21
years’ average investment experience
14
years’ average time at Newton

Strategy profile

Objective

The strategy seeks to deliver a minimum return of SOFR (30-day compounded) +2% per annum over rolling 5-year periods, from a globally diversified portfolio comprised of multiple fixed-income asset classes. In doing so, it aims to achieve a positive return on a rolling 3-year basis. However, a positive return is not guaranteed and a capital loss may occur.

Performance benchmark

SOFR (30-day compounded) +2%*

*Please note that on November 1, 2021, the performance benchmark for this strategy changed from 1-month USD LIBOR +2% to SOFR (30-day compounded) +2%.

Strategy size

C$4.0bn (as at June 30, 2022), including GBP, EUR, USD and AUD strategies

Strategy inception

Composite inception: September 1, 2010 (USD strategy); May 1, 2006 (GBP strategy)

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.

ESG analysis may vary depending on the type of security, investment rationale and investment strategy. Newton does not currently view certain types of investments as presenting ESG risks, opportunities and/or issues, and believes it is not practicable to evaluate such risks, opportunities and/or issues for certain other investments. In addition, Newton will make investment decisions that are not based solely on ESG considerations. In some cases, therefore, Newton may conclude that other attributes of an investment outweigh ESG considerations when making investment decisions.

Key investment risks

  • Performance Aim Risk: The performance aim is not a guarantee, may not be achieved and a capital loss may occur. Strategies which have a higher performance aim generally take more risk to achieve this and so have a greater potential for returns to vary significantly.
  • Currency Risk: This strategy invests in international markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • Derivatives Risk: Derivatives are highly sensitive to changes in the value of the asset from which their value is derived. A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. This can increase the sizes of losses and gains, causing the value of your investment to fluctuate. When using derivatives, the strategy can lose significantly more than the amount it has invested in derivatives.
  • Changes in Interest Rates & Inflation Risk: Investments in bonds/money market securities are affected by interest rates and inflation trends which may negatively affect the value of the strategy.
  • Credit Ratings and Unrated Securities Risk: Bonds with a low credit rating or unrated bonds have a greater risk of default. These investments may negatively affect the value of the strategy.
  • Credit Risk: The issuer of a security held by the strategy may not pay income or repay capital to the strategy when due.
  • Emerging Markets Risk: Emerging Markets have additional risks due to less-developed market practices.
  • CoCos Risk: Contingent convertible securities (CoCos) convert from debt to equity when the issuer’s capital drops below a pre-defined level. This may result in the security converting into equities at a discounted share price, the value of the security being written down, temporarily or permanently, and/or coupon payments ceasing or being deferred.
  • Counterparty Risk: The insolvency of any institutions providing services such as custody of assets or acting as a counterparty to derivatives or other contractual arrangements, may expose the strategy to financial loss.

This strategy is offered by Newton Investment Management Ltd (‘NIM’). NIM is part of the Newton Investment Management Group.

Our philosophy and process

Our investment philosophy acknowledges that investing is inherently probabilistic in nature. We believe a focus on dividend sustainability leans the statistics to our advantage, reflecting the powerful evidence that dividends, and the reinvestment of dividends, represent the dominant sources of long-term real returns in markets across the world. Compelling evidence also suggests those companies with the discipline of paying a dividend tend to allocate capital more efficiently and maintain better earnings growth.

The disciplines of our investment process aim to capture and enhance the statistical tailwind of dividends in three ways. First, our strict yield discipline seeks to ensure that every stock and the portfolio as a whole always compound at a higher yield than that of the market. This provides an objective discipline which prevents stock ‘love affairs’ and other behavioral impediments. Second, we look to enhance this tailwind by ensuring underlying cash flows are sustainable and have the ability to suffer without threatening the dividend. Third, we aim to enhance this further still by capturing a valuation margin of safety.

Individually, these three features of yield, dividend sustainability and valuation are statistically attractive and easy to find. However, in combination they are rare and typically require some element of controversy. Our process therefore focuses on identifying key ‘buckets’ of controversy where we believe the market repeatedly offers up such opportunities.

State intervention

Authorities have engaged in ever-greater policy intervention and regulation to shore up economic growth. We believe ‘state intervention’ has increased misallocation of capital, caused volatility in markets and inflated asset prices – and we think that calls for a stock-specific approach.

Smart revolution

Machines and networks are becoming more intelligent. This is disrupting the labour market, as machines increasingly replace humans in the workplace. ‘Smart revolution’ considers the implications commercially, socially and politically.

Net effects

The world has made the transition from connecting places to connecting people to connecting devices. The rapid rise in the ‘internet of things’ is transforming lifestyles and business. This creates winners and losers – our ‘net effects’ theme seeks to identify them.

Financialization

Cheap money has caused rapid growth in a sector already supported by deregulation. ‘Financialization’ investigates the implications of finance dominating economic activity, instead of serving it.

Investment team

Our Global Equity Income strategy is managed by our equity income team. Our global sector analysts and investment managers are located on a single floor in London, which helps to ensure that the investment process is flexible and opportunistic. Guided by our global investment themes, the team works together to identify opportunities and risks through research and debate.

23
years’ average investment experience
20
years’ average time at Newton

Strategy profile

Objective

The strategy seeks to outperform the MSCI World NDR Index by more than 2% per annum over rolling 5-year periods on a total-return basis, by achieving income and capital growth from a global portfolio comprised of companies that typically yield at least 25% greater than the FTSE World Index yield.

Performance benchmark

MSCI World NDR Index (total return), FTSE World Index (yield criteria)


Typical number of equity holdings

40 to 70

Yield discipline

Every new holding in a global equity income portfolio typically has a prospective yield 25% greater than the benchmark at the point of purchase. Any holding whose prospective yield falls below the benchmark yield will trigger our sale discipline process.

Strategy size

C$.7.2bn (as at June 30, 2022)

Strategy inception

January 1, 2006

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.

Newton will make investment decisions that are not based solely on ESG considerations. Other attributes of an investment may outweigh ESG considerations when making investment decisions. The way that ESG considerations are assessed may vary depending on the asset class and strategy involved. The research team performs ESG quality reviews on equity securities prior to their addition to Newton’s research recommended list (RRL). ESG quality reviews are not performed for all fixed income securities. The portfolio managers may purchase equity securities that are not included on the RRL and which do not have ESG quality reviews. Not all securities held by Newton’s strategies have an ESG quality review completed prior to investment, although since 2020 it has been a requirement for all (single name) equity securities to have an ESG quality review before they are purchased for the first time.

Key investment risks

  • Objective/Performance Risk: There is no guarantee that the strategy will achieve its objectives.
  • Currency Risk: This strategy invests in international markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • Derivatives Risk: Derivatives are highly sensitive to changes in the value of the asset from which their value is derived. A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. This can increase the sizes of losses and gains, causing the value of your investment to fluctuate. When using derivatives, the strategy can lose significantly more than the amount it has invested in derivatives.
  • Emerging Markets Risk: Emerging Markets have additional risks due to less-developed market practices.
  • Concentration Risk: A fall in the value of a single investment may have a significant impact on the value of the strategy because it typically invests in a limited number of investments.
  • Liquidity Risk: The strategy may not always find another party willing to purchase an asset that the strategy wants to sell which could impact the strategy’s ability to sell the asset or to sell the asset at its current value.
  • High Yield Companies Risk: Companies with high-dividend rates are at a greater risk of being able to meet these payments and are more sensitive to interest rate risk.
  • Counterparty Risk: The insolvency of any institutions providing services such as custody of assets or acting as a counterparty to derivatives or other contractual arrangements, may expose the strategy to financial loss.

This strategy is offered by Newton Investment Management North America LLC (‘NIMNA’) in the United States. NIMNA is part of the Newton Investment Management Group.

Strategy Overview

Technology is at the epicenter of nearly all themes, regardless of sector, industry or geography. Robotics, Artificial Intelligence (AI), Future Mobility, and Factory Automation are just a few of the many investment themes that exist due to the emergence of technology, and more importantly, device connectivity also known as Internet of Things (IoT ). Without IoT, recent advancements including machine learning, data centers, sensing and communicating robots, autonomous vehicles, rain and soil sensors, smart thermostats and doorbells, and millions of connected devices around the world would not exist. In this context, IoT is at the center of almost all themes and technological innovation, creating and enabling a connected, efficient, faster, safer and better world. IoT is also the foundation of the infrastructure that enables “Remote Life”. Due to its fundamental and enabling support for so many other themes, IoT is sometimes referred to as a “Theme of Themes”.

We follow a disciplined investment process that leverages the fundamental analysis of our Global Research team and the quantitative rankings of our alpha models. Fundamental research enables us to focus on individual securities that are modeled and analyzed for two years or more. Included in this analysis is significant work on non-quantitative attributes, such as management plans, execution, and product, intellectual property (IP), or business model uniqueness. Complementary to this, our experience in quantitative research and risk management allows us to optimize idiosyncratic risk and return at the portfolio level. This blend of quantitative and fundamental analysis maximizes the strengths of both disciplines. Further, we utilize a thematic classification framework designed around broad transformational trends across seven core themes: Consume, Move, Heal, Build, Secure, Renew and Connect. This platform approach to thematic classification provides us with compelling and dynamic universes with maximum beta to the themes to support the portfolio stock selection process.

Investment Team

Our investment team of research analysts and portfolio managers work together across regions and sectors, helping to ensure that our investment process is highly flexible

23
years’ average investment experience
13
years’ average time at Newton

Strategy Profile

Objective

The strategy seeks to generate returns through a concentrated equity portfolio that benefits from investment opportunities in the IoT space.

Benchmark

Internet of Things Custom Index.

The Internet of Things Custom Index performance benchmark is used as a comparator for this strategy. It is comprised of the GICS sub-industries, of the mid and small-cap stocks of developed-market countries that are identified to have an Internet of Things focus. There is no representation that such index is an appropriate benchmark for such comparison.

Strategy inception

May 1, 2017

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.

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.