Absolute Return  

Interview: Iain Stewart

Interview: Iain Stewart

Marine science may not be the usual background for a multi-asset fund manager, but for Iain Stewart, head of the Real Return team at Newton Investment Management, it has provided a different perspective on asset management.

After completing his PhD at the Ministry of Agriculture, Fisheries and Food, he met Stewart Newton, the firm’s founder, and joined as his assistant. “Maybe that opportunity wouldn’t be open now but he was – and the firm then was – quite open to people coming from all sorts of backgrounds, as they figured you could learn the basics very quickly,” he recalls. 

“It intrigued me, I liked the idea of being responsible for some financial assets and I’m interested in how markets work, how economies work. If one can apply a slightly different framework to that to look at it differently, which I do as a scientist, that can be very beneficial.”

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Having joined Newton in 1985, the manager can remember multi-asset’s popularity dropping in the 1990s and 2000s, “as the trend was towards specialisation”. 

“By the time we got to the late-1990s, I was feeling like a bit of a dinosaur in that there weren’t a lot of people running multi-asset any more.”

In the wake of the technology bubble collapse, Mr Stewart says: “We became convinced the world was changing in terms of returns. We couldn’t expect to have this phenomenal period any more and returns were much more likely to be lower than people had got used to and [there was] likely to be more volatility around that. 

“It made sense to us to think more about attaching ourselves to absolute returns rather than index returns. But we felt the approach that we’d used in the balanced funds for the previous 20 years or so was really valid: running a single portfolio and thinking about the characteristics of the assets and not just asset allocation. Actually thinking about what sort of assets we wanted; having a framework of the world in terms of trends, themes and what’s happening; and buying the right kind of securities,” he explains.

Utilising an existing equity fund from Newton’s Intrepid range, the vehicle was rebadged as the Absolute Intrepid fund in 2004, before being renamed a few years later with its current monicker, the Newton Real Return fund. 

“In this environment, you want to think as much about not losing money as making it. One of the best ways to do that is to give our team a target that only goes up, so the mindset changes from relative to absolute [return].”

The fund started with assets of £13m, but it now holds approximately £13bn. As the manager puts it: “[The strategy] has been reasonably successful in terms of attracting money.”