Real Return Investment Strategy

Strategy highlights

: Actively managed, absolute-return investment approach, with an emphasis on capital preservation

A focus on security selection, asset class flexibility and simple hedging strategies – to manage risk and offer investors the potential to enjoy attractive long-term total returns

Flexible, transparent, single portfolio of predominantly direct and liquid investments

Our philosophy and process

: The Real Return 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 (environmental, social and governance) 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 themes to help identify opportunities.

Investment team

Our Real Return strategy is managed by an experienced team with a wide range of backgrounds. In-house research analysts are at the core of our investment process, and our multidimensional research platform spans fundamental, thematic, ESG, quantitative, geopolitical, investigative and private-market research to promote better-informed investment decisions.

19: years’ average investment experience
13: years’ average time at Newton

Andy Warwick

Co-lead, Real Return team
Aron Pataki

Co-lead, Real Return team
Matt Brown

Portfolio manager, Real Return team
Philip Shucksmith

Portfolio manager, Real Return team
Lars Middleton

Portfolio manager, Real Return team
Brendan Mulhern

Global strategist, Real Return team
Catherine Doyle

Investment specialist
Chris King

Investment team support

Strategy profile

Objective: The strategy aims to deliver a total return of SONIA (30-day compounded) +4% per annum over 5 years before fees. 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: SONIA (30-day compounded) +4%*

Volatility: Expected to be between that of bonds and equities over the long term
Strategy size: £9.4bn (as at 31 March 2023), including GBP, EUR, USD and AUD strategies
Strategy inception: Composite inception: 1 April 2004
Typical assets: Selective exposure to

Equities

Corporate bonds

Government bonds

Cash derivatives; Other assets via tradeable securities

Real estate

Commodities

Currencies

Infrastructure

Renewable energy

Other ‘alternative’ strategies
Strategy available through pooled UK vehicle: BNY Mellon Real Return Fund

View fund performance
View Key Investor Information Document
View prospectus
: * Please note that on 1 October 2021, the performance benchmark for this strategy changed from 1-month GBP LIBOR +4% to SONIA (30-day compounded) +4%.

Strategy factsheet

Performance and commentary for the last quarter.

Download Factsheet

Responsible investment report

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

Download Report

Brochure

More detail on the strategy’s investment approach.

Download Brochure

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. Those considerations are among many inputs into the fundamental analysis. Other attributes of an investment may outweigh ESG considerations when making investment decisions. The way that material ESG considerations are assessed may vary depending on the asset class and strategy involved. As of September 2022, the research team performs ESG analysis on equity securities prior to their addition to Newton’s Research Recommended List (RRL). ESG 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 reviews. Not all securities held by Newton’s strategies have an ESG review completed prior to investment.

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 programmes. 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.

Gold, hedge funds or private equity risk: Where the portfolio has exposure to hedge funds, gold, private equity and property via publicly quoted transferable securities, there are additional risks associated with these sectors.