Investment approaches
global equity income
A high-conviction global strategy with an investment approach which aims to capture and enhance the most statistically significant source of long-term real returns – the compounding of dividends through time
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Aims to deliver an attractive total return over the long term, pursuing an asymmetric return profile (low downside market capture)
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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
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A global investment universe offers investors an opportunity to diversify their equity investments. Active stock selection is guided by our investment themes, fundamentals and valuation
Our philosophy and process
Our investment philosophy acknowledges that investing is inherently probabilistic in nature. We believe a focus on sustainable dividends 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. Compelling evidence also suggests those companies with the discipline of paying a dividend tend to allocate capital more efficiently and maintain better earnings growth.
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 behavioral 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, 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.
- Environmental, social and governance (ESG) considerations are integrated throughout the research process and via proprietary quality reviews, to ensure that any material issues are captured.
- 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.
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.
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.
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.
Net effects
The world has made the transition from connecting places to connecting people to connecting devices. The rapid rise in the ‘internet of things’ is transforming lifestyles and business. This creates winners and losers – our ‘net effects’ theme seeks to identify them.
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.
Investment team
Our Global Equity Income strategy is managed by our equity income team. 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.
- 19
- years’ average investment experience
- 15
- years’ average time at Newton
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Ilga Haubelt
Head of Equity Income
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Robert Hay
Portfolio manager, global equity income
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Paul Flood
Portfolio manager, global equity income
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Jon Bell
Portfolio manager, global equity income
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Zoe Kan
Portfolio manager, emerging and Asian equity income
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Nick Pope
Junior portfolio manager
Strategy profile
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Objective
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The strategy seeks to outperform the MSCI World NDR Index by more than 2% per annum over rolling 5-year periods on a total-return basis, by achieving income and capital growth from a global portfolio comprised of companies that typically yield at least 25% greater than the FTSE World Index yield.
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Performance benchmark
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MSCI World NDR Index (total return), FTSE W World Index (yield criteria)
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Typical number of equity holdings
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40 to 70
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Yield discipline
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Every new holding in a global equity income portfolio typically has a prospective yield 25% greater than the index at the point of purchase. Any holding whose prospective yield falls below the comparative index yield will trigger our sale discipline process.*
*In order to prevent the portfolio from being unable to buy or being a forced seller of securities that have suspended their dividend purely owing to the Covid-19 situation, a new additional buy and sell discipline basket has been created specifically for such securities, which temporarily overrides the strategy’s security-level yield-based disciplines. Securities falling into this basket may be purchased or continue to be held providing there is a reasonable expectation that any dividends will be reinstated at a level consistent with the strategy’s yield criteria. The rationale for each affected security will be reviewed at least every six months. -
Strategy size
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US$7.5bn (as at Dec 31, 2020)
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Strategy inception
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January 1, 2006
Quarterly factsheet
Facts on the strategy’s performance and positioning.
Responsible investment report
Stewardship activities (voting and engagement) for the last quarter and ESG metrics.
Brochure
More detail on the strategy’s investment approach.
Quarterly video update: Q3 2020
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.