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$23.2bn (as at Dec 31, 2021), including GBP, EUR, USD and AUD strategies

Strategy inception

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

NIMNA Global Real Return 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.

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.