• In recognizing these challenges, we believe a holistic approach is a necessity, and that belief is the foundation for our multidimensional research platform.

A Toolkit for the Modern Investor

Fundamental Equity

At Newton we take an active approach to the allocation of our research resources. Deep fundamental research is at the heart of our multidimensional research platform, and our investment professionals are our most valuable resource.

While many in the industry rely on industry classification standards to allocate research resources, we believe that in today’s markets, technology-fueled innovation and disruption mean that there are more effective ways to organize this.

Through a proprietary quantitative and qualitative process, we have developed a fundamental equity research framework that rewrites classifications into five clusters that we call ‘pods’. These pods look to group companies based on numerous characteristics including their maturity, economic sensitivity and idiosyncratic composition. We believe this results in a more efficient and active approach to allocating our investment resources, with three key positive outcomes:

• It allows for ‘apples-to-apples’ comparison of similar businesses.
• It enables insights to be shared more freely instead of being constrained by a hierarchical industry classification system.
• It helps align our portfolio managers with areas of the market and analysts that are most relevant to their portfolios.

Fixed Income & Credit

Dedicated fixed-income and credit research analysts cover sovereign, investment-grade and high-yield markets, working closely with equity and multi-asset analysts to thoroughly research companies across capital and governance structures. Thinking across the capital structure of businesses can be highly revealing; credit insights have proved valuable, for example, in shaping some of the decisions on portfolio holdings taken by our equity portfolio managers.

Responsible Investment

All our investment team members have access to two primary technology-based tools that map an issuer’s approach and performance in relation to ESG matters. These capture our internal conclusions, alongside data from external providers, and assist in the analysts’ and portfolio managers’ assessment of possible ESG issues. Our analysts are supported by a well-resourced, global responsible investment team, comprising subject-matter experts, which oversees our overall sustainability ecosystem and drives our internal frameworks, policies, standards, and specialized insights.

Find out more about responsible investment

Quantitative

Through a combination of qualitatively informed quantitative inputs, our team thoughtfully incorporates data insights throughout our investment process. We believe that these quantitative tools help our team better focus their efforts. Whether the insights relate to identifying companies that resonate most strongly with observable thematic trends, the idiosyncratic nature of a company, or grouping businesses that have common characteristics, they are key tools that help us maximize the output of our investment team.

Alternatives

Certain alternative investments, including infrastructure, renewable energy and music royalties, can be less sensitive to the economic cycle, offering diversification benefits and the prospect of stable returns. However, careful analysis remains essential, and our specialists undertake detailed research in order to obtain a deep understanding of the business models and structures of these companies.

Micro & Macro Themes

We leverage the capabilities of our multidimensional research platform to identify and investigate transformational ‘micro’ and ‘macro’ shifts across economies and industries. This leads, through further detailed research, to the creation of specific themes. Themes provide our investment team with a long-range lens through which to view the structural changes that are taking place across the globe, and to look beyond often-superficial classifications like sectors or countries of domicile.

Themes can alert the members of our investment team to the new opportunities that change creates, and help identify the emerging risks that will impair the value of investments.

Find out more about our thematic research framework

Investigative

Our team of skilled ‘investigative’ researchers (comprising former investigative journalists) can equip our portfolio managers with differentiated views on key issues affecting investments that they consider. From talking to energy ministers to lawyers to peer journalists and academics, our investigative research team is a unique resource that can help give our investors a clearer picture on an investment case.

Private Markets

Innovation and disruption are everywhere. With industry stalwarts losing overnight to new upstarts, understanding competitive dynamics is key to generating investment returns – by investing in the winners but also, importantly, by avoiding the losers. Companies are staying private for longer, which makes it difficult for public equity investors to fully understand the risk of disruption from these companies. We have therefore developed a private-markets team that allows our investors to peek behind the curtain into the private realm and provide insights that can enhance our investors’ understanding of the risks or opportunities in relation to their public holdings.

Geopolitics

Our geopolitical research helps our investors understand how politics and changing international relations are influencing financial markets. It also provides a valuable input into our ‘macro’ themes.

Forensic Accounting

Financial reports, if interpreted carefully, can reveal a significant amount about both a company’s strengths and weaknesses, and the quality of management. Distilling the numbers into differentiated investment questions can help lead to high-quality investment discussions between analysts and companies.

Multidimensional Research in Practice

By providing access to innovative tools and specialist insights from our subject-matter experts, our multidimensional research platform helps our investment teams to make better-informed decisions.

Below are just a few examples of where our portfolio managers and analysts have harnessed expertise from across the breadth of our research capabilities, with direct investment implications:

Case Study 1

As part of research into a US retailer, our fundamental equity analyst had concerns over management succession and the impact of a continued unionization effort at its stores, while also wondering if there were any technological innovations that the company could introduce to improve employee relations while simultaneously enhancing the customer experience and growth.

Our analyst engaged our investigative research team, who met industry thought leaders, trade groups, and former high-ranking executives of the retailer, as well as speaking to a tech start-up that is partnering with retailers in the sector to bring efficiency and improve employee morale.

The team saw significant potential for innovation that could help the company’s transition, and encountered a number of possible opportunities and obstacles that they believed would make execution key to the outcome for investors.

The research also uncovered a potential investment opportunity for our private markets team.

Case Study 2

The debt of a retail company held in one of our active equity portfolios was starting to trade at concerning levels.

The portfolio manager and fundamental equity analyst covering the security sought our credit analysts’ perspective. After the credit analysts noted that there was a growing likelihood of the company undertaking a debt restructuring, we decided to sell the security.

This highlights how understanding the entire capital structure can be imperative when making investment decisions. Our credit analysts now join our weekly fundamental equity ‘pod’ meetings, which we believe will result in more examples of fixed-income/equity interactions benefiting our clients.

Case Study 3

Our commodities team were concerned over reported human-rights abuses at a mine of a company offering exposure to gold.

Although the company claimed that these issues had been addressed, we asked our ESG investigative research analyst to undertake further research. They worked closely with a human-rights watchdog group, which obtained well-documented evidence that the abuses were continuing.

As a result, the commodities team sold the position in the company, highlighting how ESG considerations can be integrated into our investment process.

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.

These opinions should not be construed as investment or other advice and are subject to change. This material is for information purposes only. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell investments in those countries or sectors. Please note that holdings and positioning are subject to change without notice.

Newton manages a variety of investment strategies. Whether and how ESG considerations are assessed or integrated into Newton’s strategies depends on the asset classes and/or the particular strategy involved, as well as the research and investment approach of each Newton firm. ESG may not be considered for each individual investment and, where ESG is considered, other attributes of an investment may outweigh ESG considerations when making investment decisions.