Greater patience needed to outperform, says Newton’s Wilmot
Richard Wilmot, manager of the £1.22bn Newton UK Equity fund, says he is now choosing to wait for more than five years for his investments to prove themselves due to the turmoil of the past half decade.
Mr Wilmot took over the fund from Christopher Metcalfe in March last year. Along with the Newton Higher Income fund managed by Tineke Frikkee, the product has become one of Newton’s flagship UK equity funds after its recent merger with Newton’s Income and UK Growth portfolios. The manager claims he has gone back to “good, old fashioned investing” and is focusing on picking quality companies at a good price that he is confidence will add value to the portfolio over time.
“Clearly, the market is quite volatile from quarter to quarter and year to year, which makes it increasingly difficult to position a portfolio for every twist and turn. What we are spending more time doing is concentrating on a much longer term investment horizon, looking into the underlying qualities of the business, and we would be looking to hold these for quite some time.
“That makes up a significant proportion of the UK equity fund. We are looking to build positions in businesses with a view to holding them for five to 10 years. What we might find is that this long-term view works so well that we just carry on doing it.”
In selecting stocks for the portfolio, Mr Wilmot relies heavily on a team of 20 analysts, which carry out due diligence on any potential investment that fit into Newton’s overarching investment themes.
“Everyone at Newton participates in the themes, the thought process behind them and the work involved in them,” Mr Wilmot explains.
One theme Mr Wilmot is playing in his portfolio is technology, and the increasingly important role it is fulfilling in both society and business.
“There are lots of businesses now that are finding their mode of operation transformed by technology, whether that is by iPads or a back office system. We think this is something that has been with us for 15 years really in terms of the more significant developments,” he says.
Another of Newton’s and Mr Wilmot’s themes is ‘deleveraging’, in particular following the financial crisis. The manager explains the theme has three sections to it – reducing indebtedness, state intervention in the financial system and inflationary ‘fire risks’ ignited by action from monetary policymakers.
“The deleveraging process is the one we are seeing happening to consumers and to banks. Deleveraging is very difficult and very challenging for the financial structures and can be quite a drag on economic activity,” he says.
“What usually follows is state intervention, which we have seen in the form of quantitative easing, or the long-term refinancing operation in Europe. That in itself causes what we then describe as fire risks – short-term inflationary consequences of this action.”