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At first sight, Newton Investment Management’s philosophy seems like a marriage of opposites.

The house is known for its thematic approach: it identifies trends, such as ageing populations in developed economies, and then invests globally in the companies likely to benefit from them.

But it also specialises in equity income, traditionally associated with the narrower universe of UK stocks. At £2.9bn, the flagship Newton Higher Income fund is the fourth-largest retail fund in the IMA UK Equity Income sector.

This double expertise has led to unusual products such as the £153m Asian Income fund, which offers investors exposure to a region known for capital growth, but with an annual payout of over 4 per cent.

Asian Income was launched alongside £375m Global Higher Income in November 2005, when enough non-UK companies had started paying dividends for global income investing to be possible. Since launch, Global Higher Income has grown 45 per cent, placing it in the top decile of the IMA Global Growth sector, which averaged only 20 per cent over the period.

Helena Morrissey, chief executive at Newton, attributes the company’s strong performance across the global range in part to the “credit theme”: the house has been significantly underweight banks – the mainstay of most income investors – throughout the financial crisis.

But global themes and income have not made a perfect match for all the funds. Most notably, Newton Higher Income, which yields 5.4 per cent, has slipped into the third quartile for the three years to 16 June.

Ms Morrissey, who used to head Newton's fixed income team, says: “Some players have more latitude than us when it comes to the yield discipline. We insist yield is 15 per cent above the FTSE All-Share. In momentum markets like the TMT boom that becomes a headwind.”

She says mining stocks are currently riding a similar wave, which Newton Higher Income is missing out on. “If the mining sector continues to do well, that will be a problem,” she adds.

As a result, many investors have left the UK equity income fund in favour of its better-performing younger sister. Indeed, Ms Morrissey says Newton’s thematic approach works best with an unconstrained mandate.

“Emerging markets have been a very big positive theme for us over the last few years. The wider the geographical remit, the more opportunities there are,” she explains.

The rise of global equity is a market-wide trend, as investors realise globalisation is breaking down traditional geographic boundaries. But Ms Morrissey insists Newton does not try to be fashionable.

“Our style is not to find out whether anyone is interested in what we have to offer, but to do something we think we might be good at and hope it will eventually interest someone,” she says.

A further example is the £337m Absolute Intrepid, which sits in the newly created IMA Absolute Returns sector, but has been run to a mandate of Libor plus four since March 2004. Over the turbulent year to 16 June, it grew 5 per cent – below benchmark, but above equity or fixed income returns for the period.

Inevitably, Paul Feeney, head of distribution for BNY Mellon Asset Management, which owns Newton, has compared Absolute Intrepid with Mark Lyttleton’s £865m BlackRock UK Absolute Alpha fund, one of the few big winners of the credit crunch.

But whereas Mr Lyttleton attributes his success to shorting strategies, Iain Stewart, who manages Absolute Intrepid, reduces his exposure by buying put options.

“Shorting is a different skill set,” says Ms Morrissey. “What we know we do well is long-only investing from a thematic perspective. We have no proven abilities shorting.” She also cites the danger that shorting would damage Newton’s relationships with the management of companies in which it is invested.

It comes as no surprise, therefore, that she has no plans to launch 130/30 products. “Our stance on the trendy stuff is to avoid it – many of these things turn out to be passing fads,” she says. “I personally think 130/30 funds are a load of old rubbish.”

Although Ms Morrissey believes shorting in house is incompatible with the Newton approach, she is not philosophically opposed to the practice. The £153m Phoenix Multi-Asset fund, which sits in the IMA Cautious Managed sector, invests in hedge funds.

Nor is she opposed to hedge fund charging practices. Some 75 per cent of Newton’s institutional business, which accounts for over half of Newton’s £37bn assets under management, already relies on performance fees. Ms Morrissey would now like to introduce them to retail clients, particularly on Absolute Intrepid.

“That’s something you should expect to see from Newton in the not too distant future,” she says.

It is easy to understand why. Newton projects a pre-tax profit margin of 40 per cent this year. “Performance fees protect us in downturns,” Ms Morrissey observes.

She also attributes Newton’s financial success to a selective approach to sales. “It is better for Newton to outperform than to grow assets. Last year was our best ever financially, but we didn’t grow the asset base at all, because we closed some institutional strategies. You don’t have to be all things to all people.”

But Newton bucked the trend in the first quarter of this year. Inflows less outflows totalled £184m for the period – the firm’s best for over a year – ranking it fifth in Lipper Feri’s quarterly league table of UK net retail sales. The £1.1bn Newton Balanced and the £1.4bn Newton Managed funds saw some of the highest inflows, according to Lipper Feri.

Given the volatile trading conditions in January to March, the popularity of cautious products is not surprising. But Ms Morrissey also sees it as evidence that “holistic portfolios” – considered dated by some – are still the most convenient option for retail investors.

“Newton has never been afraid not to be fashionable, but ironically now we are quite current,” she says. “People are realising the traditional stuff you can actually understand is not so bad after all.”