Newton Global Dynamic Bond Fund
Newton Investment Management
April 2016
With bond yields at extremely low levels, and significant
risks in both financial markets and the real economy, we
expect a challenging decade ahead for bond investors.
However, we do not believe it will be without opportunity.
We anticipate marked divergence in the fortunes of
regions, currencies and bond instruments, and in the
interest rate environment in different economies. Against
this backdrop we believe a dynamic, unconstrained
approach to bond investing should help investors
maximise opportunities while mitigating the risks.
A dynamic, absolute-return
approach to fixed income,
designed to deliver
performance and preserve
capital.
• Bond asset class exposure
managed dynamically and driven
by market opportunities and risks,
unconstrained by an index
• The flexibility to use stabilising
assets and hedging positions to
provide downside protection and
preserve capital
• Investing globally to provide
diversification and take advantage
of the divergence between the
prospects of different countries
For professional investors only. This document is for Australian
and New Zealand wholesale clients only. Please read the
important disclosures at the end of this document.
RISK VS RETURN SINCE INCEPTION APRIL 2006 – MARCH 2016
8 7 6 5 4 3 2 1 0 Return (%)
Risk (standard deviation) 0 LIBOR Global Dynamic Bond Fund GV IG HY EM 2 4 6 8 10 12
GV – Global government bonds
IG – Global investment-grade corporate bonds HY – Global high-yield corporate bonds EM – Emerging-market sovereign bonds
Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested. Historic volatility is no guide to future volatility.
Source: Newton, £ total returns, gross of management fees, gross income reinvested, as at 31 March 2016.
*These are not guarantees, may not be achieved and a capital loss may occur. Funds which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different from those which are expected.
Strategy type
An unconstrained, dynamic, actively managed
fixed income strategy which uses a mixture
of return-seeking and hedging techniques.
Strategy AUM
AUD$3.4 billion (as at 31 March 2016)
Source: Newton
Strategy inception
April 2006
Performance aim
Cash (1-month GBP LIBOR) +2% per
annum over 5 years before fees. We also
aim to achieve a positive return on a
rolling 3 year basis.*
Since its inception, the Newton Global
Dynamic Bond Fund has delivered:
•
an annualised gross return of +7.0%
•
a positive return in every calendar year
Going global – expanding the horizons of
your investment universe
After years of coordinated monetary and fiscal policies, individual
countries are adopting different approaches to tackling the
aftermath of the global financial crisis. As a result, considerable
divergence in relation to monetary and fiscal policy, inflation and
credit conditions between economies seems likely to lie ahead.
We believe investing in a range of bond and currency markets
around the world should allow investors to benefit from the
divergence we anticipate in interest rates, currencies and bond
markets in general.
This approach takes into consideration where we are in the credit
cycle and adjusts to the changing liquidity environment.
A global thematic approach
At Newton, we have employed a global, thematic approach to
investment for more than 30 years in seeking to meet the
long-term investment objectives of our clients.
Our themes help us identify the long-term trends and structural
transformations in the world around us which are likely to shape
the investment landscape ahead.
By taking a step back from day-to-day distortions we aim to put
into context the near-term news that can create so much ‘noise’
in financial markets, allowing us to filter opportunities for the
strategy and identify risks.
1 Compared to more established economies, the value of investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles or from economic or political instability.
Allowable asset classes
The strategy can invest up to 50% in any one of the following
global asset classes:
• government bonds
• emerging-market sovereign bonds
1• investment-grade corporate bonds
• high-yield corporate bonds
and also makes use of:
• cash
• derivatives
• currencies (minimum 50% in base currency)
We think that the freedom to move dynamically between
different regions and asset classes should help investors to
weather bouts of market turbulence while remaining true to
their long-term objectives.
Represents the first
stages of idea
generation and
risk management
Provide a dynamic
framework for
investment thinking
Allow a longer-term
global perspective
in a volatile world
Identify drivers of
long-term change
demand Healthy Construction & reconstruction £ $ ¥ €How does it work?
• Transparent, single portfolio of direct
investments, selected for their strong
fundamentals and thematic support
• Emphasis on traditional fixed income
asset classes for simplicity and liquidity
• Return-seeking core of four key asset
classes
• Stabilising assets and hedging positions to
dampen volatility and provide capital
preservation
• Flexibility to adapt both security selection
and asset allocation dynamically, in order
to orientate portfolios according to our
long-term views
Absolute-return investment approach
Bond indices are constructed by market capitalisation; the greater the
volume of a country’s issuance, the heavier its index weighting. As
governments issue more debt, they become larger constituents of the
index. An index-based approach entails holding more of the debt of
such issuers, regardless of the soundness of underlying fundamentals.
As a result, we believe there are advantages in not being tied to
an index, but using market opportunities and risks to create a
high-conviction portfolio of securities, backed up by thematic
support and attractive fundamentals.
Dynamic and flexible
In order to take advantage of the changing fortunes of different asset classes, we believe a dynamic and flexible allocation is vital in order to
help maximise opportunities and minismise risks. It means that we can adapt our strategy to changes in the economic cycle, whether in
relation to rising interest rates, defaults, devaluation or inflation.
This chart demonstrates the varying fortunes of the four key fixed-interest asset classes since 2006.
1st
2nd
3rd
4th
Q1 2016
EM 4.8
GV 4.0
IG 3.3
HY 3.0
2015
GV 1.7
EM 0.9
IG 0.1
HY -2.1
2014
GV 8.7
IG 8.0
EM 7.9
HY 2.7
2013
HY 7.3
IG 0.2
GV -0.2
EM -4.5
2012
EM 22.1
HY 18.7
IG 10.9
GV 4.6
2011
GV 6.3
IG 5.1
EM 4.6
HY 2.9
2010
EM 15.2
HY 14.9
IG 7.5
GV 3.9
2009
HY 59.7
EM 35.7
IG 16.1
GV 1.2
2008
GV 11.7
IG -3.4
EM -16.1
HY -27.0
2007
GV 6.4
EM 5.6
IG 3.8
HY 2.5
2006
EM 12.1
HY 10.2
IG 3.3
GV 2.8
Key
HY
IG
GV
EM
Global high-yield corporate bonds
Global government bonds
Global investment-grade
corporate bonds
Emerging-market sovereign bonds
Note: 1994-1997 US IG and HY indices used. Compared to more established economies, the value of investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles or from economic or political instability.
Source: Newton, Merrill Lynch Indices Hedged into Sterling, 31 March 2016
Stabilising assets / hedging positions
Return seeking assets Global government bonds Cash/short-dated bonds Floating rate notes Index-linked bonds Negative
duration Government bondderivatives
Exchange traded funds Active currency positions Currency hedge Stabilising assets/hedging tools
Emerging-market sovereign bonds Global investment-grade
corporate bonds Global high-yieldcorporate bonds
• Asset class rankings change frequently with
a marked difference between best and worst
performing asset classes
• Dynamic asset allocation is vital to adapt to
changing market opportunities and risks
Want to find out more?
Phil Filippelis
Country head – Australia
+61 2 9260 6670
[email protected]
BNY Mellon Investment Management Australia
Level 2, 1 Bligh Street
Sydney NSW 2000
Australia
Sebastien Brown
Portfolio advocate
+44 (0)20 7163 2806
[email protected]
Newton Investment Management Limited
The Bank of New York Mellon Centre
160 Queen Victoria Street
London EC4V 4LA
United Kingdom
Global Dynamic
Bond investment
management team
The fixed income team consists
of nine investment professionals
with 16 years’ average
investment experience and 8 years’
average tenure at Newton:
• focused, experienced team based
in single location promotes
collaboration and ensures swift
implementation of investment ideas
• benefits from strong and fruitful
collaboration with our wider
investment team. Invaluable in
providing a broad perspective.
Fixed income team
16 years’ average investment experience – 8 years at Newton
Paul Brain Lead manager and fixed
income team leader
Trevor Holder
Jon Day
Martin Chambers Ashwin Palta Carl Shepherd Scott Freedman Howard Cunningham Alternate manager Khuram Sharih Parmeshwar Chadha Alternate manager
Why Newton?
• Track record of managing fixed income strategies for over 30 years
• Managing AUD$90.2 billion of assets on behalf of clients including pension funds,
corporations and charities around the world (as at 31 March 2016)
• Single location of the investment team enables swift and efficient idea generation and
implementation
• Global thematic framework ensures long-term investment perspective
We believe the key strengths of the Newton Global Dynamic Bond Fund are:
• Dynamic, unconstrained investment approach designed to capture opportunities when they arise and protect capital
in falling markets
• Positive return in every calendar year since inception in 2006
• Stable, experienced team who have worked together for a number of years
• Holistic, single portfolio approach, with a transparent investment methodology
Important information
This is a financial promotion. This document is for professional investors only. The opinions expressed in this document are those of Newton and should not be
construed as investment advice or any other advice and are subject to change. This document is for information purposes only and does not constitute an offer or solicitation to invest. Past performance is not a guide to future performance. Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested. Portfolio holdings and positioning are subject to change at any time without notice and should not be construed as investment recommendations. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell this security, country or sector. Past or current yields are not indicative of future yields. The value of overseas securities will be influenced by fluctuations in exchange rates Where the portfolio is invested in sub-investment-grade bonds, which typically have a low credit rating and carry a high degree of default risk, please be aware that this may affect the capital value of your investment. Compared to more established economies, the value of investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles or from economic or political instability. Historic volatility is no guide to future volatility. The strategy may hold derivatives. An investment in derivatives may be volatile, but the volatility of the strategy is not expected to be any greater than that of the underlying stock and fixed-income markets. You should read the Prospectus and the Key Investor Information Document (KIID) for each fund in which you want to invest. The Prospectus and KIID can be found at www.bnymellonim.com. In the UK, this document is issued by Newton Investment Management Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England No. 01371973. Newton Investment Management is authorised and regulated by the Financial Conduct Authority.
This material is for Australian wholesale clients and New Zealand wholesale investors only and is not intended for distribution to, nor should it be relied upon by, retail clients. This information has not been prepared to take into account the investment objectives, financial objectives or particular needs of any particular person. Before making an investment decision you should carefully consider, with or without the assistance of a financial adviser, whether such an investment strategy is appropriate in light of your particular investment needs, objectives and financial circumstances. This information is made available by Newton Investment Management Limited and BNY Mellon Investment Management Australia Ltd (AFSL 227865). This information is confidential and is only provided to Australian wholesale clients (as that term is defined in section 761G of the Corporations Act 2001 (Cth)). This is not an offering or the solicitation of an offer to purchase an interest in the Newton Global Dynamic Bond Fund. This document is for general purposes only and should not be relied upon as financial product advice. This document has been prepared without taking into account the objectives, financial situation or needs of any person. Before making an investment decision an investor should consider the appropriateness of the information in this document having regard to these matters and read the disclosure document relating to a financial product. Investors should also consider obtaining independent advice before making any investment decisions. Investments can go up and down and to the extent that this document contains any past performance information, past performance is not a reliable indicator of the future performance of the relevant investment or any similar investment strategy. Newton Investment Management Limited is exempt from the requirement to hold an Australian financial services licence in respect of the financial services it provides to wholesale clients in Australia and is authorised and regulated by the Financial Conduct Authority of the UK under UK laws, which differ from Australian laws. Newton Investment Management Limited (Newton) is authorised and regulated in the UK by the Financial Conduct Authority (FCA). Newton is providing financial services to wholesale clients in Australia in reliance on ASIC Class Order 03/1099, a copy of which is on the website of the Australian Securities and Investments Commission, www.asic.gov.au. The Class Order exempts entities that are authorised and regulated in the UK by the FCA, such as Newton, from the need to hold an Australian financial services license under the Corporations Act 2001 for certain financial services provided to Australian wholesale clients on certain conditions. Financial services provided by Newton are regulated by the FCA under the laws and regulatory requirements of the United Kingdom, which are different to the laws applying in Australia. Newton is providing financial services to wholesale investors in New Zealand in reliance on the Safe Harbour regime under the Financial Markets Conduct Act 2013, Schedule 1 part 3. T4117 05/16
