The Analyst: Newton's back? Yes, you do the maths

During the 1990s, Robert Shelton was one of the most highly regarded managers in the UK, and his Newton Income Fund was a top performer. The canny Yorkshireman's command of economic analysis and stock-picking earned him all the respect and plaudits now afforded to the current superstar manager, Invesco Perpetual's Neil Woodford.

However, Shelton's career was tragically cut short when he was seriously injured in a car accident in 2002. Thankfully he survived, but he spent months in hospital and had to give up managing the fund.

The Newton Income Fund soon started to struggle, and a succession of new managers were unable to turn things around. I was on the verge of recommending that investors sell their holdings when I heard that yet another new manager had been appointed – Chris Metcalfe. After meeting him, I felt confident that he had the potential to bring success back to the Newton Income Fund.

Mr Metcalfe explained that he would seek to reduce the number of holdings (which had grown to well over 80) to somewhere around 60. This would give greater focus to the portfolio and concentrate it into the ideas about which he had the greatest conviction. He also wanted to make greater use of the 20 per cent of the portfolio he is allowed to invest overseas.

He has been in the job for six months now, and I recently met him again for an update on progress. I am pleased to report that the changes he has made seem to be doing the trick. In fact, it has been one of the best performers in its sector.

So what has turned performance around? Mr Metcalfe has centred the current portfolio on defensive larger companies as well as energy and commodity stocks, while taking a negative view on banks and property.

What a fantastic mix this has been over the past six months! With house builders struggling, the banking system in turmoil and commodity prices booming, it is no wonder the Newton Income Fund has forced its way to the top of the tables.

The portfolio now consists of 60 stocks, 20 of which are listed overseas, including many of the main emerging markets. Note that the vast majority of UK stocks are exposed to overseas earnings rather than the domestic market. In my opinion, this is no bad thing given that sterling is likely to weaken over the next couple of years once this Government's much-vaunted economic stability is exposed as an illusion.

In terms of sectors, Mr Metcalfe currently favours mobile telecoms followed by aerospace, fixed-line telecoms, tobacco healthcare and food producers. The largest overweight position in the portfolio is Vodafone at 8 per cent. He believes that telecoms give him the best of both worlds – exposure to rapid emerging-market growth and, in the developed world, the expansion of data traffic.

He also has exposure to the potash producer K&S. This is an area Newton is very keen on, as this commodity is greatly in demand for agriculture but is a rare commodity and difficult to mine.

You may have noticed a familiar theme here. Even in a core UK fund such as this, we see the issues of commodities, energy, agriculture and emerging market growth rearing their heads. I have been mentioning it for many weeks now, but this really underlines how much these themes are driving global markets at the moment.

Chris Metcalfe is negative on banks, except for those – such as Standard Chartered and HSBC – that are exposed to Asian markets. Unlike other fund managers, he believes that the domestic banks are not nearly as good value as they appear, particularly Royal Bank of Scotland, which he believes overpaid for ABN Amro.

It is important to note that, despite its name, Newton Income has not been a real equity income fund for many years. It is basically a growth fund that pays a small yield, and Chris Metcalfe will continue to manage the fund along these lines. I do wonder whether persisting with the old name is the right thing to do – it is potentially misleading for investors. I have now met Chris Metcalfe twice and am impressed with his determination to get this fund back where it used to be. He has been putting much of his own money into the fund, which is a sign of confidence and commitment that I always like to see. In my opinion, the Newton Income Fund is much one to keep an eye on. If the improvement is sustained, you may once again see advisers recommending it at the core of a UK portfolio.



Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Arts and Entertainment
musicOfficial chart could be moved to accommodate Friday international release day
Sport
Wes Brown is sent-off
football
News
i100
Sport
Italy celebrate scoring their second try
six nations
Sport
Glenn Murray celebrates scoring against West Ham
footballWest Ham 1 Crystal Palace 3
Arts and Entertainment
Drake continues to tease ahead of the release of his new album
music
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Recruitment Genius: Office Manager / Financial Services

    £30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

    Jemma Gent: Year End Accountant

    £250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

    Jemma Gent: Management Accountant

    £230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

    Day In a Page

    The Last Word: For the good of the game: why on earth don’t we leave Fifa?

    Michael Calvin's Last Word

    For the good of the game: why on earth don’t we leave Fifa?
    HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

    Scientists hail daily pill that protects against HIV infection

    Breakthrough in battle against global scourge – but will the NHS pay for it?
    How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

    Time to play God

    Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
    MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

    MacGyver returns, but with a difference

    Handyman hero of classic 1980s TV series to be recast as a woman
    Tunnel renaissance: Why cities are hiding roads down in the ground

    Tunnel renaissance

    Why cities are hiding roads underground
    'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

    Boys to men

    The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
    Crufts 2015: Should foreign dogs be allowed to compete?

    Crufts 2015

    Should foreign dogs be allowed to compete?
    10 best projectors

    How to make your home cinema more cinematic: 10 best projectors

    Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
    Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

    Manchester City vs Barcelona player ratings

    Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
    Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

    Monaco: the making of Wenger

    Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
    Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

    Chris Gayle: The West Indies' enigma

    Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
    In Ukraine a dark world of hybrid warfare and murky loyalties prevails

    In Ukraine a dark world of hybrid warfare

    This war in the shadows has been going on since the fall of Mr Yanukovych
    'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

    Homage or plagiarism?

    'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
    Broadchurch ends as damp squib not even David Tennant can revive

    A damp squib not even David Tennant can revive

    Broadchurch, Series 2 finale, review
    A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

    Inside the mansion of Germany's 'Bishop of Bling'

    A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower