Strategy highlights

  • Pursuing an asymmetric return profile (low downside market capture), with active stock selection guided by our investment themes, fundamentals and valuation
  • Disciplined approach seeks to ensure that every stock and the overall portfolio compounds at a higher yield than that of the market, and that dividends are underpinned by sustainable cash-flow streams
  • ESG analysis positively identifies companies which effectively incorporate sustainability into their core business and strategy, while actively omitting companies involved in areas of high social cost, environmental degradation or violators of the UN Global Compact Principles

Our philosophy and process

Harnessing Newton’s global analysis resources, the strategy adheres to our investment framework focused on fundamentals, themes, valuations and ESG considerations.

We focus on innovative companies and dynamic management teams that provide solutions and benefit from growth opportunities. Active corporate engagement and proxy voting provide powerful feedback loops that make us more informed shareholders who promote positive corporate development.

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.

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 behavioural 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.

Sustainable ‘red lines’, with responsible investment team validation, seek to ensure there is no investment in security issuers that:

  • Breach the UN Global Compact
  • Are incompatible with a 2˚C world
  • Are deemed to have material ESG risks which are likely to negatively affect future performance and are associated with significant social or environmental harm

The strategy seeks to avoid investing in companies that participate in specific areas of activity that we deem to be harmful from an environmental and/or social perspective.

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.

Investment team

Our Sustainable Global Equity Income strategy is managed by an experienced 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.

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

Strategy profile

Objective

The strategy seeks to achieve income together with the potential for capital growth over the long term (5 years or more).

Performance benchmark

FTSE W World Index


Typical number of equity holdings

70 or fewer


Yield discipline

Every new holding in a sustainable 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.

Literature

Application form
Key Investor Information Document (KIID)
Prospectus
RI report Sustainable global equity income

Responsible investment report

Stewardship activities (voting and engagement) for the last quarter and ESG metrics.


Sustainable 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.

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 and the assessment of their suitability for Newton’s sustainable strategies may vary depending on the asset class and strategy involved. For Newton’s sustainable strategies, ESG Quality Reviews are performed prior to investment for corporate investments (single name equity and fixed income securities).

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.
  • Sustainable strategies risk: The strategy follows a sustainable investment approach, which may cause it to perform differently than strategies that have a similar objective but which do not integrate sustainable investment criteria when selecting securities. The strategy will not engage in stock lending activities and, therefore, may forego any additional returns that may be produced through such activities.
  • 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.
  • 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.
  • High yield companies risk: Companies with high-dividend rates are at a greater risk of not being able to meet these payments and are more sensitive to interest rate risk.