Fund in Focus: Newton Real Return

This fund is a strong choice for cautious investors looking for a core fund for their well diversified portfolio, says Morningstar analyst Linsay McPhater

Morningstar Analysts 8 August, 2014 | 4:46PM
Facebook Twitter LinkedIn


Newton Real Return is a strong choice for investors who seek a more cautious element to their portfolio, but still pursue positive long-term absolute returns. 

The fund has an experienced and highly credible lead manager in Iain Stewart. He has worked at Newton for more than 20 years, specialising in managing multi-asset and global equity mandates. Importantly, he is well-supported by other members of the Real Return team and the wider investment team and analysts. 

The starting point for the investment process is a target return of Libor plus 4.0 gross of fees, and risk, which has a target volatility range of 10%-12% over the long term.

However, the manager's view is that a permanent diminution of value is the main risk to any investment he makes. This thinking drives the way he evaluates positions, as does the long-term value of the underlying assets in which he invests. The manager fully utilises Newton's global thematic framework, which is at the heart of the investment process, although the experience and insight he contributes are a major part of the fund's appeal. 

The portfolio has a flexible remit and can invest across the asset-class spectrum, with both derivative and hedging strategies used to reduce risk and deliver positive returns. However, the manager's focus on delivering his long-term objective inherently leads to a net-long bias, which can make the fund vulnerable to negative returns in market declines.

This was the case in 2011 when the hedges and capital preservation strategies were not sufficient to offset the defensive equities and corporate bonds being held in the core of the portfolio. 

Stewart has maintained a relatively defensive position since 2008, which held back returns in 2011. Even so, the fund has a strong long-term track record and, with the exception of 2011, has delivered positive returns in every calendar year since 2004.

The flexibility of the fund and experience and pragmatism of the manager, supported by Newton’s global thematic investment approach, make this a solid choice. The fund retains its Bronze rating.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BNY Mellon Real Return A GBP Inc121.83 GBP0.26Rating

About Author

Morningstar Analysts   -

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures