Our philosophy and process

  • The Real Return fund is a conviction-based strategy with no regional, sector or performance reference constraints. It adopts a forward-looking approach that seeks to anticipate change, manage risk, and identify opportunities.
  • Its simple structure, with a stable core of predominantly traditional return-seeking assets, and a layer of risk-offsetting positions, aim to dampen volatility and preserve capital.

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.

Financialisation

Cheap money has caused rapid growth in a sector already supported by deregulation. ‘Financialisation’ 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 – stabilising 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 minimise 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 Real Return strategy is managed by an experienced team with a wide range of backgrounds. 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.

17
years' average investment experience
15
years' average time at Newton

Strategy profile

Performance aim

The strategy aims to deliver a minimum return of cash (one-month sterling LIBOR) +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.

Volatility

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

Strategy size

£13.6 billion (as at 30 September 2018)

Strategy inception

Composite inception: 1 April 2004
Representative portfolio (Newton Real Return Fund) 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
UK Inst Real Return pooled fund factsheet

Factsheet

Facts and commentary for the past quarter's fund and market performance.


Real Return Fund Brochure UK

Brochure

More detail on the strategy's investment approach.


Key Investor Information Document

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

 

  • 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 the returns to be significantly different than expected.
  • This strategy invests in international markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
  • The strategy will 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.
  • Investments in bonds are affected by interest rates and inflation trends which may affect the value of the strategy.
  • The strategy holds bonds with a low credit rating that have a greater risk of default. These investments may affect the value of the strategy.
  • The strategy may invest in emerging markets. These markets have additional risks due to less developed market practices.
  • The strategy may invest in investments that are not traded regularly and are therefore subject to greater fluctuations in price.