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Newton Multi-Asset Income - new fund launch

Kate Marshall | Wed 28 January 2015

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

Investors' hunt for income is as strong as ever, yet a sustained period of low interest rates has made it increasingly difficult to identify sources of inflation-beating income.

Some investors are looking towards multi-asset portfolios offering a regular income as a solution. These funds provide exposure to a variety of investments, where the asset allocation decisions lie in the hands of a professional fund manager. However, unlike cash, the income from these funds is not guaranteed.

The Newton Multi-Asset Income Fund, due to launch on 4 February 2015, is one such fund. It will aim to provide a sustainable, monthly income, while also seeking to gently grow capital over the long term. The fund will target a yield at least 30% greater than its comparative index (comprised of 60% global equities and 40% global bonds) and the expected yield at launch is 4.2%, though this is subject to change.

Where will the fund invest?

The fund will adopt a flexible approach by investing globally across a variety of sectors, countries and asset classes, including shares, bonds and cash.

At the helm of the fund is Paul Flood, a member of Newton's Multi-Asset team, who will be assisted by Nick Clay, a member of Newton's Global Equities team. The managers will also harness the expertise of Newton’s network of global analysts and use the group's thematic investment approach to uncover both risks and opportunities present in the market.

The investment process begins by considering the fund's income target. Newton's view of the world is then considered to come up with the portfolio's overall asset allocation. Paul Flood will subsequently select what he believes to be the best opportunities within each asset class to construct the portfolio.

The fund will tend to invest directly in individual shares and bonds, though it can also invest in other collective vehicles, including investment trusts, to gain access to more specialist areas, such as infrastructure.

How will the fund be positioned at launch?

Source: Newton

  • Global equities - the managers will seek high-quality companies offering attractive yields. These businesses have the ability to generate durable cash flows independent of fluctuations in the wider economic cycle. The fund can also invest in smaller companies and those in emerging markets which increases risk.
  • Bonds - in a world of subdued economic growth and persistently low interest rates, many income-seeking investors have flocked to government bonds. This demand has driven yields down (and prices up) and the managers do not view the yields currently on offer as attractive. The fund, therefore, is expected to have limited exposure to government bonds at launch. The fixed interest element of the portfolio will be biased towards corporate bonds, where the managers believe the yields on offer are more attractive for the level of risk taken.
  • Alternatives - this portion of the fund invests in more specialist areas such as property and infrastructure funds. Infrastructure companies can increase prices, and dividends, in line with or above inflation, even in uncertain economic times, which the managers view as an attractive proposition. They may also invest in derivatives which is a higher risk approach.
  • Cash - holding cash will allow the managers to take advantage of new opportunities when they arise, particularly during periods of market volatility.

What experience do the managers have?

Paul Flood joined Newton's Multi-Asset team in 2006 and he provides leadership and analysis on asset allocation. He has managed the Newton Multi-Asset Diversified Return Fund since June 2011; over this time, the fund has outperformed its target of cash (as measured by LIBOR) + 3% p.a. over 5 years, however, it has underperformed the sector average.

Annual percentage growth
Jan 10 -
Jan 11
Jan 11 -
Jan 12
Jan 12 -
Jan 13
Jan 13 -
Jan 14
Jan 14 -
Jan 15
Newton Multi-Asset Diversified Return 11.6% -1.7% 7.7% 4.8% 5.9%
IA Mixed Investment 20-60% Shares 8.8% -2.0% 8.1% 8.7% 4.8%
LIBOR 1 month + 3% 3.6% 3.7% 3.6% 3.5% 3.5%

Past performance is not a guide to future returns. Source: Lipper IM* to 02/01/2015.

Nick Clay, the fund's co-manager, joined Newton in 2000 and he is currently deputy manager of the Newton Global Higher Income Fund. He has also managed an offshore version of this fund, the BNY Mellon Global Equity Higher Income Fund, since August 2012. The fund has underperformed its benchmark over this time.

Annual percentage growth
Jan 11 -
Jan 12
Jan 12 -
Jan 13
Jan 13 -
Jan 14
Jan 14 -
Jan 15
BNY Mellon Global Equity Higher Income 2.2% 10.1% 14.0% 8.6%
FTSE World -5.5% 12.4% 19.7% 12.6%

Past performance is not a guide to future returns. Full year performance figures before this date are unavailable.

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Our view on this fund

The challenge of finding a sustainable income is increasing and the proposition of receiving a stable and regular income is attractive. That said, it should be remembered that unlike cash, stock market investments are not guaranteed so the capital and income will fluctuate in value and you could get back less than you invest.

This new fund seeks to harness two core strengths of Newton: multi-asset and equity income investing – areas in which we believe the group have succeeded in the past. The co-managers will also be able to draw on the expertise of Newton's network of research analysts. That said, the managers each have a fairly limited track record for us to assess their fund management capabilities and the new fund will behave differently than previous ventures. At present this fund will not be added to the Wealth 150 list of our favourite funds across the major sectors, though we will monitor performance following its launch.

Please note the fund's charges can be taken from capital, which can increase the yield but reduce the potential for capital growth.

Investors wishing to invest at launch can place their instruction online or over the telephone with our dealers by 5pm on 3 February.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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