Investment approaches
Sustainable Global Equity Income
A high-conviction global strategy which seeks to deliver an attractive long-term total return by harnessing the power of compounding and the insights of detailed environmental, social and governance (ESG) analysis
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Pursuing an asymmetric return profile (low downside market capture), with active stock selection guided by our investment themes, fundamentals and valuation
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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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ESG analysis positively identifies companies which effectively incorporate sustainability into their core business and strategy, while avoiding companies with material ESG risks which could negatively affect future performance
This strategy is offered by Newton Investment Management Ltd (‘NIM’). NIM is part of the Newton Investment Management Group.
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.
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.
- As we seek to positively influence companies as a shareholder or potential shareholder, we use the levers that are available to equity investors, including proxy voting and direct engagement with companies. While we do invest in those companies that already have strong ESG profiles, we prioritize companies that are improving their ESG performance. In this way we seek to help drive positive ESG outcomes, while having the potential to achieve financial benefits through this change.
- ‘Red lines’ ensure that the companies that we choose to invest in do not violate the UN Global Compact’s ten principles that promote responsible corporate citizenship, or have characteristics which make them incompatible with the aim of limiting global warming to 2°C (3.6°F). We also incorporate a tobacco exclusion as we do not view tobacco businesses as compatible with our commitment to sustainable investment.
- 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 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. Our dedicated responsible investment team is an integral part of the investment decision-making process. Guided by our global investment themes, the team works together to identify opportunities and risks through research and debate.
- 21
- years’ average investment experience
- 12
- 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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Tim Lucas
Portfolio manager, equity income team
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Zoe Kan
Portfolio manager, emerging and Asian equity income
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Nick Pope
Portfolio manager, equity income team
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, by achieving income and capital growth from a global portfolio comprised of companies that typically yield at least 25% greater than the FTSE W World Index yield, and which demonstrate attractive investment attributes and sustainable business practices.*
*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. -
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
- 70 or fewer
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Strategy size -
Below US$350m (as at Sept 30, 2021) -
Strategy inception
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July 18, 2019
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.