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Newton Real Return - Two portfolios in one

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.
  • The fund’s had some management changes
  • The team are cautious in their outlook for the global economy
  • But they still feel some companies have good growth potential

Our view

Newton Real Return can invest in different assets anywhere in the world. This gives the managers a lot of flexibility. They aim to provide some long-term growth, as well as some shelter when markets have a hard time.

The fund’s built in two layers. One makes most of the return by investing in riskier assets such as shares, high-yielding bonds, and emerging markets. The other invests in assets such as government bonds, gold and cash, which could help preserve wealth when stock markets fall. The managers change how much is invested in each layer depending on how confident they’re feeling about future market returns.

It means the fund doesn’t tend to rise as much when stock markets rise quickly, but it should provide some shelter when they fall, although there are no guarantees. So we think it could be a good option for a more conservative portfolio, or provide diversification to one with more invested in shares. The fund features on the Wealth 150+ list of our favourite funds across the major sectors.

Change at the top

Iain Stewart recently stepped back as the fund’s lead manager. He’s still involved, but is now mainly focused on forming views of the wider economy and how this should be reflected in the way the fund invests.

Suzanne Hutchins, who’s been part of the team running this fund since 2010, and Aron Pataki are now co-lead managers. With the support of Iain Stewart and a large team of analysts at Newton, they make the overall decisions over where the fund is invested on a day-to-day basis.

Treading carefully

The team are cautious in their outlook for the global economy. They also think share prices might not have much further to rise after performing so well for the past decade. So the amount of the fund invested in shares has been kept low at around 35%.

Being cautious doesn’t mean the managers aren’t alert to opportunity. They’ll still invest in companies they think offer some growth potential. They’ve recently taken profits from investments in Microsoft, Royal Dutch Shell and Diageo and used the money to buy shares in PepsiCo, Applied Materials and Praxair.

In the bond portion of the fund they recently sold some emerging market bonds. They reinvested in Australian government bonds because they think Australian interest rates could fall. Typically, bonds do better when interest rates fall because the yield on offer looks more attractive than the interest available on cash deposits.

The managers also use derivatives, which can help control the impact of the performance of certain assets, though they can also increase risk.

Balancing risk and return

Stock markets have performed well for several years, which is a tougher environment for more cautious funds like Newton Real Return. But its style means it’s more likely to come into its own when stock markets are having a tough time, which we’ve seen so far this year. We expect the fund to continue to perform in this way over the long run although past performance is not a guide to the future.

And we think its long-term track record of providing a return whilst protecting investors in downturns is very good. But all investments can fall as well as rise in value so you could get back less than you invest.

Newton Real Return - long-term performance

Past performance isn’t a guide to the future. Source: Lipper IM 31/03/04 to 31/10/18

Annual percentage growth
Oct 13 -
Oct 14
Oct 14 -
Oct 15
Oct 15 -
Oct 16
Oct 16 -
Oct 17
Oct 17 -
Oct 18
Newton Real Return 0.1% 2.4% 6.8% -1.9% -1.9%
LIBOR GBP 1 Month + 4% 4.5% 4.5% 4.5% 4.3% 4.2%

Past performance is not a guide to the future. Source: Lipper IM to 31/10/2018.

Please read the Key Features/Key Investor Information in addition to the information above.

Find out more about this fund including how to invest

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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