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 dividend sustainability 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, dividend 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.
- Material and relevant ESG risks, issues and opportunities are considered as part of the investment process.
- A constantly evolving and forward-looking approach seeks to anticipate change, manage risk, and identify opportunities.
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 investment team of research analysts and portfolio managers works together across regions and sectors, helping to ensure that our investment process is highly flexible. Guided by our global investment themes, we seek to identify opportunities and risks through research and debate.
- 23
- years’ average investment experience
- 20
- years’ average time at Newton
-
Robert Hay
Portfolio manager, global equity income
-
Jon Bell
Portfolio manager, global equity income
-
Zoe Kan
Portfolio manager, emerging and Asian equity income
-
Tim Lucas
Portfolio manager, UK Equities team
-
Nick Pope
Portfolio manager, sustainable equity strategies
-
John C Bailer
Deputy head of equity income, portfolio manager
-
Brian Ferguson
Portfolio manager, equity income team
-
Peter D Goslin
Portfolio manager, equity income team
-
Keith Howell Jr.
Portfolio manager, equity income team
-
Adam Logan
Portfolio manager, equity income team
-
James A Lydotes
Deputy chief investment officer, equity
Strategy profile
-
Objective
-
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.
-
Performance benchmark
-
MSCI World NDR Index (total return), FTSE World Index (yield criteria)
-
Typical number of equity holdings
-
40 to 70
-
Yield discipline
-
Every new holding in a global equity income portfolio typically has a prospective yield 25% greater than the benchmark at the point of purchase. Any holding whose prospective yield falls below the benchmark yield will trigger our sale discipline process.
-
Strategy size
-
US$5.6bn (as at June 30, 2022)
-
Strategy inception
-
January 1, 2006
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. Other attributes of an investment may outweigh ESG considerations when making investment decisions. The way that ESG considerations are assessed may vary depending on the asset class and strategy involved. The research team performs ESG quality reviews on equity securities prior to their addition to Newton’s research recommended list (RRL). ESG quality 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 quality reviews. Not all securities held by Newton’s strategies have an ESG quality review completed prior to investment, although since 2020 it has been a requirement for all (single name) equity securities to have an ESG quality review before they are purchased for the first time.