Our investment approach

Each of our clients has direct access to their investment manager and this is a key feature of our approach to investment management. The investment manager heads the client's investment team, which includes an alternate manager and portfolio administrator, and is responsible for agreeing and implementing the appropriate investment strategy.

The success of the service we offer is dependent on a close working relationship between client and fund management team and we encourage frequent contact and regular meetings to review strategy, performance and future plans. These meetings are an important part of the process as they enable us to ensure we are managing clients' investments in accordance with their evolving requirements.

Each client has a different investment requirement; consequently we manage a wide range of portfolios with different risk profiles, return objectives and income yields. Portfolios may be invested directly or through pooled funds and are constructed to meet agreed objectives.

Newton is a subsidiary of the Bank of New York Mellon Corporation, one of the largest financial organisations in the U.S.. We have made a significant investment in undertaking our own research and our knowledge of company managements is an important part of our assessment of companies. Our approach is not compromised by other activities, such as corporate finance or market making, allowing us to focus on making appropriate investments, based on the best interests of our clients.

The basis of our investment philosophy is that no industry, market or economy can be considered in isolation. Only by understanding events, trends and competitive pressures worldwide can prospects for international or domestic investments be evaluated properly. We therefore conduct research globally.

The success of the portfolios we manage results from our investment approach and understanding of the investments we hold. Our global research team conducts fundamental research across markets for each of the world's major industries, including most of the largest 500 companies in the world as well as a number of small and medium sized companies. The team consists of career analysts, many of whom have experience in the industry they cover.

In addition, we have regional teams (UK, Europe, America and Asia-Pacific) which cover domestic and smaller companies within their regions; and we have specialist teams covering strategy, bonds and high-yielding equities.

We identify the trends or themes which are likely to change the prospects for businesses and aim to identify those companies that will be able to benefit from them. Many of these themes are essentially strategic in their character and often match the long-term time frame of most of our clients. They can last for many years and provide a foundation for our understanding of the competitive pressures and opportunities facing companies. At any one time, we are likely to be exploiting ten to fifteen major themes. Recent themes include more government, which brings focus to our consideration of how sectors and companies will be affected by changes in the global economy, changes in the terms of trade and increasing state regulation.

With over 100 experienced investment professionals, one of Newton's greatest strengths is the depth and breadth of the investment team. No one is excluded from the investment process and we are encouraged to challenge our colleagues' investment views. This leads to lively and focussed debate, either informally or at any of the many investment meetings. It ensures also that research is thorough and that managers take individual responsibility for the investments they make for their clients.

The majority of our clients wish to invest for the long term. Consequently, their portfolios include a reasonable proportion of equities as we expect these to offer the most attractive long-term returns. Within the equity element of a portfolio, we aim to identify companies which should be able to grow earnings and dividends for many years. In addition, we are prepared to take advantage of shorter-term valuation anomalies in individual holdings or asset classes. Diversification across sectors and geographic regions is encouraged and we may use externally-managed pooled funds, particularly where they offer exposure to areas to which it would be difficult to gain exposure in a segregated portfolio and where we believe it to be in the interest of the client and in our ability to achieve their objectives.

For short-term investors or for those with known liabilities, cash and bonds are likely to be an important element of an investment portfolio. Where applicable, we invest (with client agreement) through externally-managed vehicles in alternative assets such as hedge funds, property, commodities and private equity.

There is a high degree of commonality between client portfolios with similar benchmarks, irrespective of the investment managers involved and many portfolios managed directly in line with one of our charity model portfolios. However, most charity clients mandate their investment management team with a degree of flexibility and this can be particularly beneficial where there are cash flows into or out of the portfolio. In these cases the portfolios are monitored regularly to ensure that the overall construction is appropriate and that all the investments purchased under the manager's discretion have been researched within Newton.

Our research analysts analyse stock-specific risks. The investment managers are responsible for managing the risk profile of the portfolio and the centralised dealing team is responsible for executing investment transactions. In addition, the risk profile of all our investment funds (and model portfolios) is reviewed monthly by the portfolio analytics team, and the portfolio analysis group monitors the performance of each client portfolio every quarter.

An important responsibility of the investment managers is to ensure that the relevant performance benchmark is agreed with the client. The benchmark should encapsulate the objectives of the fund and the level of risk the client is prepared to adopt. Risk-averse clients may choose "absolute" benchmarks such as money-market rates, inflation, gilt indices, equity market indices or peer group benchmarks. Our focus on stock selection means that we do not follow benchmarks slavishly, yet believe them to play an important part in our accountability to clients.

We report to our clients regularly with details of the performance we have achieved for them. Our clients have placed a great deal of trust in us and we aim to offer the highest levels of service and performance in return.

We are specialists in investment management. We do not offer legal advice, taxation services, pension advice or banking facilities. We aim to provide clients with an integrated and holistic service by working with their other advisers, where appropriate.