group Hits £1bn retail sales mark despite a number of high profile departures this summer
Newton has reached the £1bn net retail sales mark for 2001 despite seeing some redemptions as a result of fund manager departures this summer. Newton estimates that for every £4 invested into the group's funds this year there has been £1 of redemption.
Newton's year has been uncharacteristically eventful with the group suffering a number of high profile departures, following the end of a contractual lock-in period in July. Other key managers remain locked-in until May next year.
The resignations included UK income fund manager Toby Thompson, who is to join New Star Asset Management, chief investment officer Charles Richardson and chief executive officer Colin Harris. A few months later the group's head of European equities, Kieran Gallagher departed to join LeggMason.
Up until the departures, Newton had been known for its ability to retain fund managers due to long-term incentive plans the group has always had in place. The mass exodus brought internal changes with Helena Morrissey, then head of the fixed income team, ceasing to run funds and becoming CEO. Jeff Munroe took on the role of chief investment officer.
This could have hurt the company quite substantially, but the group claims it has been able to rely on its in-house research capabilities, global thematic investment process and team structures in order to maintain fund performance. Morrissey added that all the teams are helped by a team of global analysts providing supporting research.
While the research process may have helped to underpin the investment policy and keep redemptions to a minimum, the group is likely to really suffer should Robert Shelton, manager of its flagship High Income fund, depart.
Shelton, who remains locked in until next year, is probably the group's most high profile manager. His fund has the longest unbroken AAA rating in Standard & Poor's UK history. Mark Dampier, head of research at Hargreaves Lansdown, noted the research process assisted the group when the fund managers left in July and will do so in the future. But he said it would be unlikely to help them if Shelton were to leave.
He added that Newton's only problem has been in communicating what has happened within the company and that strategies and fund management changes, for whatever reason, need to be transparent.
Newton's European team has had a good reputation over the years, but there is a question mark over it at the moment because of the departure of Gallagher according to Dampier. 'The high yield product is good but there is a lot of competition in that sector,' he said. 'It is important to have a big team working on high yield and Newton's is not as large as the likes of RSA Investments or M&G.'
Other vehicles Newton has been successful with over recent years have been Newton Oriental run by Ezra Sun and Newton American, managed by Trish Bridson.
When asked whether there were any obvious holes in the group's fund range, Morrissey said that if there were they would be present somewhere else under the Mellon umbrella.
'We have no strategy to add more and more funds because even where there are gaps in the fund range, they will probably be accessible elsewhere under Mellon,' she said.
Dampier added: 'Actually, there are no gaps in Newton's range. I believe there are too many funds around already and people like Newton should stick to what they know best.'
Newton came into being in 1978 and can boast £22bn of assets under management distributed between both retail and institutional funds. It launched its first two unit trusts in 1985, the Global and Income portfolios. These funds are both now flagship products for the group.
After building a range of seven funds, Newton increased its assets under management by acquiring Capital House Investment Management in 1994. This meant that six funds were added and a further 13 were merged into the existing range. Other Newton acquisitions include the asset management business of Hogg Robinson in 1996 and the Challenger trust from Whittingdale in 1997.
As part of the agreement to sell its Capital House subsidiary, the Royal Bank of Scotland (RBS) took a 33% stake in Newton. In 1998, RBS sold out to Mellon Bank, which acquired 75% of Newton with the remainder held by Newton's management and staff.
Mellon Financial is made of a number of autonomous subsidiaries, one of which is Newton Fund Managers. According to Ron O'Hanley, vice-president of the Mellon Financial Corporation, asset management is a critical line of the business. 'It makes up 50% of growth and profits for the whole Mellon group,' he said. 'We have a strategy of having separate subsidiaries that are organised around the group with different capabilities. They all have distinct investment processes and classes and all sell to a number of markets.'
He said Newton has a distinct approach within the overall picture. 'The Newton global thematic process is unlike anything else at Mellon,' he added. 'It is a process that will grow as global economies continue to integrate. The aim of Newton has always been to offer the institutional capabilities and quality to retail clients. Its roots are in institutional and we want to bring that to the retail market.'
Morrissey said: 'The reason we liked Mellon is because it buys groups it likes and leaves them alone to manage assets as they have been. It has a model of buying individual autonomous subsidiaries. Scale is important and it then adds its distribution and IT capabilities that we would not have had access to on our own.
According to Morrissey, Munroe's appointment as CIO has been a big help to her role. 'It means that we have two investors at the top overseeing investments,' she said. 'I still run an institutional fund, as does Jeff. The global thematic approach to investing is one of Newton's distinguishing traits.'
Munroe said 'We have a team of global sector analysts who try to understand themes and big changes across the globe. Their role is to identify market drivers to create a strong background for analysing individual stocks and assembling portfolios. They provide analysis and input on stocks that the fund manager then uses to build portfolios.'
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