Christopher Metcalfe took over the running of this £1.5bn fund in March 2011, since when he has managed to meet his objective of ensuring the portfolio is top quartile in its peer group, the Investment Association Flexible Investment sector.
The fund’s name was changed in January this year from Newton Managed to Newton Multi-Asset Growth – the growth comes from being surrounded by “good ideas”, Mr Metcalfe remarks.
The manager explains: “We believe in only holding stocks that we really like and not holding any just because they’re a large part of the benchmark.” He says that 30 years in fund management has taught him that’s the best way to drive outperformance. “At present we’ve got about 70 holdings in total, including around five bonds – so a fairly concentrated portfolio of just our best stock ideas. When we like a stock we will take a significant position in it.”
Ideas are generated by several teams at Newton, which has an in-house research department at its disposal. Mr Metcalfe notes: “We have a thematic backdrop that helps direct the analysts to the type of stocks we want to be investing in. As a fund manager I get lots of ideas from economists, other members of the team, from our bottom-up analysts and from our bond team. It’s really just trying to pick the best ideas that I get from everyone and putting it together in a portfolio that will do well against the sector.”
The manager has been finding the most value in UK, US and European equities in the past year, while he has less exposure to Japan, Asia-Pacific and the emerging markets. The portfolio is positioned with 38 per cent in UK equities, 26 per cent in US companies and 20 per cent in European equities, he reveals. One of the themes playing out in the fund is the idea that economic growth is set to remain subdued. This translates into those companies that “can eke out some growth in a fairly difficult environment”, he says.
In sectoral terms, the portfolio is overweight healthcare and media. Mr Metcalfe remarks: “We continue to think healthcare is an interesting area, and we have a number of themes such as population dynamics [and] ageing population. We also think there’ll be continuing growth from developing markets in healthcare as a result of [their] increasing wealth.
“We like the free cashflows that are generated in media and the valuations in some stocks, such as Wolters Kluwer and Reed [Elsevier], still look fairly attractive to us.”
One sector the manager is less keen on is commodities and he does not hold any mining stocks, while the portfolio also has an underweight to oil and gas. “Banks are the other area we would be underweight if we expect a fairly tricky economic environment to persist,” he adds.
This fund is at the slightly riskier end on the risk-reward scale at level five, while an ongoing charge applies to the sterling income shares, which is the clean retail share class.
The fund’s performance across the one and three years that Mr Metcalfe has been managing it has been strong. It returned 58.56 per cent in the three years to May 28 compared with the average of 40.63 per cent generated by the sector, placing the portfolio in the top quartile, data from FE Analytics shows.
He acknowledges that media stocks have done particularly well for the fund in this period and across the 12 months. “The stocks were on cheap ratings at the beginning [of the three years] because media is transforming itself from being print based to being digital based, and there were a lot of worries about many of the media companies [and] how their business models would transfer from that environment,” he says.
Other stock decisions that have paid off are technology firms, such as UK accounting software business Sage, as well as general retailers Dixons Carphone Warehouse in the UK and Dollar General in the US, he adds. “We think we can get better returns from carefully selected cash-generative equities. We haven’t gone headlong into the bond market and we continue to be underweight bonds against the benchmark. If you look at any of the decisions we’ve got wrong in the past 12 to 36 months, it is being too cautious in the bond market.”
EXPERT VIEW
Juliet Schooling Latter, director of research, Chelsea Financial Services
This fund had its name changed in January but it still perplexes me, as does the IA sector in which it sits. The portfolio invests in UK and international securities, which to me says ‘global equity fund’ rather than multi-asset. And when you look closely, the Lipper sector is ‘equity global’ – all rather strange. The fund’s yield is low at just 1 per cent. Naming conventions aside, the portfolio has done well against both the IA’s Flexible Investments sector average and the Global sector average. However, I do think Newton has work to do in making sure investors know what they are getting with this fund, as people could easily be misled going by the name alone.
