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 sustainable dividends 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, 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.

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.

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.

19
years’ average investment experience
13
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 index at the point of purchase. Any holding whose prospective yield falls below the comparative index yield will trigger our sale discipline process.*

*In order to prevent the portfolio from being unable to buy or being a forced seller of securities that have suspended their dividend purely owing to the Covid-19 situation, a new additional buy and sell discipline basket has been created specifically for such securities, which temporarily overrides the strategy’s security-level yield-based disciplines. Securities falling into this basket may be purchased or continue to be held providing there is a reasonable expectation that any dividends will be reinstated at a level consistent with the strategy’s yield criteria. The rationale for each affected security will be reviewed at least every six months.

Strategy size

C$8.4bn (as at June 30, 2021)

Strategy inception

January 1, 2006

NIMNA Global Equity Income brochure

Brochure

More detail on the strategy’s investment approach.

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.

Key investment risks

  • There is no guarantee that the strategy will achieve its objective.
  • This strategy invests in global markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • The strategy may use derivatives to generate returns as well as to reduce costs and/or the overall risk of the strategy. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • The strategy may invest in emerging markets. These markets have additional risks due to less developed market practices.
  • 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.
  • The strategy may invest in small companies which may be riskier and less liquid (i.e. harder to sell) than large companies. This means that their share prices may have greater fluctuations.