Newton Global Emerging Markets strategy

Transcription

1 Newton Global Emerging Markets strategy For professional investors only. This document is for n and New Zealand wholesale clients only. Compared to more established economies, the value of investments in emerging markets may be subject to greater volatility owing to differences in generally accepted accounting principles or from economic or political instability. Please read the important disclosures at the end of this document. April 216 Finding real value in emerging markets High-conviction strategy benefiting from strong fundamentals, attractive valuations and long-term thematic support Unconstrained by index composition Long-term investment horizon Emerging markets, by their very nature, provide exposure to high growth potential, but are often characterised by short-term volatility and diverging performances at regional, industrial and company levels. In such an environment, ensuring that you are invested in the best possible stocks is essential. We seek to invest in companies that generate real value from their growth and reinvest it for the benefit of all shareholders. We believe investors in emerging markets can capture growth potential and minimise risks with an investment approach which is truly active and incorporates environmental, social and governance (ESG) analysis in the investment process from the outset. Emphasis on growth, quality, return on capital employed and governance Performance aim To outperform the MSCI Emerging Markets Index by in excess of 2% p.a. over a rolling five-year period Inception date May 211 Number of holdings Approximately 5-8 PERFORMANCE FROM INCEPTION (31 MAY 211) TO 31 MARCH (From 31 May) Newton Global Emerging Markets Composite (gross of fees) Q1 216 MSCI Emerging Markets Index Cumulative returns (%) Cumulative return (RHS) Since its inception in May 211, the Newton Global Emerging Markets strategy has delivered relative outperformance of +5.7% p.a. (to 31 March 216, gross of fees, in AUD terms), providing excess returns in both up and down markets. Annualised returns (%) to 31 March 216 HY 3.31 year 3 year Since inception (31 May 211) Newton Global Emerging Markets Composite (gross of fees) GV MSCI Emerging Markets (comparative index) Note: Composite performance calculated as total return (including reinvested income) and charges. All figures are in AUD terms. 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. The impact of an initial charge (currently not applied) can be material on the performance of your investment. Further information is available upon request. The MSCI Emerging Markets Index is used as a comparative index for this strategy. The strategy does not aim to replicate either the composition or the performance of the comparative index. Source: Newton Global Emerging Markets Composite in AUD terms, 31 March 216. This data is from a representative portfolio and is for illustrative purposes only.

2 Truly active management Emerging economies present divergent opportunities and risks to investors. This is why Newton s Global Emerging Markets strategy employs rigorous analysis to identify those companies which have the potential to generate strong cash flows and reinvest these in growth opportunities on a continuing basis. While a passive investor is compelled to buy more of those areas which have already performed well (and which therefore have a higher index weighting), and where much of the growth may already have happened, an active investor aims to identify areas of future good performance and growth, and take higher conviction positions in these. ACTIVELY POSITIONING FOR FUTURE GROWTH OPPORTUNITIES Energy Materials Industrials Consumer discretionary Index 7.7% 6.6% 6.8% 9.8% Newton Global Emerging Markets strategy Energy, Materials, Industrials <5% e-commerce 34.5% Consumer discretionary Consumer staples Health care 8.3% 2.6% 18.4% Consumer staples Financials 27.4% Healthy demand.% Health care 14.5% Financials Information technology 2.7% Telecommunication services Utilities 6.9% 3.2% Historic IT software vs. hardware 15.9% Future growth Information technology Cash 1.3% Source: Newton, 31 March 216. The MSCI Emerging Markets Index is used as a comparative index for this strategy. The strategy does not aim to replicate either the composition or the performance of the comparative index. Strategy holdings are subject to change at any time without notice and should not be construed as investment recommendations. Core investment tenets The Newton Global Emerging Markets strategy aims to capture value creation available from growth in emerging markets, with a reasonable level of risk. Emphasis on active management: fundamental bottom-up security selection Seeking compounders (high returns reinvested in growth) Aiming to harness under-recognised earnings from strong franchises, brands, barriers to entry, etc. Exposure to thematic tailwinds Seeking robust fundamentals through a downturn Not chasing the market, nor relying on momentum Tight watch list of potential investments Funda m entals Themes Portfolio construction Valuation Environmental, social and governance (ESG) focus We believe that responsibly managed companies are best placed to achieve sustainable competitive advantage and provide strong long-term investment opportunities. However, the governance structures of many emerging-market companies tend to be less clean than those of their developed-market counterparts. Our dedicated responsible investment team, which is an integral part of our investment decision-making process: conducts ESG quality reviews of companies considered for investment aims to provide the investment team with an overview of the material ESG risks and opportunities facing a company, and details of how the company addresses and reports on these issues

3 Themes help identify opportunities and challenges Against a differentiated emerging-market backdrop, we use investment themes to focus on areas of growth and avoid areas of risk. WORKING AGE POPULATION GROWTH ( , UN ESTIMATES) Population dynamics are key drivers of GDP growth and asset prices, but vary hugely between emerging markets. Such dynamics may create favourable investment opportunities, for example where they are associated with strong working-age population growth, but they may also entail risks which reduce the appeal of some markets. Nigeria Kenya Egypt Philippines India Malaysia Peru Mexico Indonesia United Arab Emirates South Africa Turkey Brazil Colombia Vietnam Chile New Zealand United Kingdom China Czech Republic Thailand Korea Hungary Japan Russian Federation Poland Germany -2% -% % % 2% % 4% 5% 6% 7% 8% Source: Newton, UN Population Information Network - World Population Prospects: The 215 Revision, April 216 MSCI EMERGING MARKET COUNTRIES % STATE CONTROL Some emerging markets have a high level of state control, which can distort the investment outlook and reduce returns. Sectors with higher state ownership include the utilities, energy, telecommunications and financials sectors. Conversely, IT, consumer and health-care sectors are relatively free from state control China 7.3 Russia 68.5 Qatar 67.3 Poland 61.8 UAE 57.8 Czech Rep. 5.8 Indonesia 45.1 Malaysia 44.2 Greece 4.6 Thailand 36.6 Colombia 36. Hungary 24.9 Brazil 16.5 Turkey 16. India.6 Egypt 6.4 Taiwan 6.3 South Korea 4.7 South Africa.5 Philippines. Mexico. Chile. Peru. For illustrative purposes only. Source: CLSA, FactSet, Bloomberg, March 215. Current MSCI Emerging Markets constituents are used to calculate the government control per country. % state control is calculated by aggregating MSCI weight of companies in the respective country with effective government control. Total EM (Emerging Markets) is a weighted average Total EM Healthy demand Expanding incomes and changing lifestyles in emerging markets have created a growing demand for health care, but government provision is often lacking. This creates a big private sector opportunity. The mobile internet is booming in many emerging markets as more consumers get reliable 3G and 4G access. Companies which can harness the resulting e-commerce opportunities are set to benefit.

4 Global Emerging Markets investment management team The Global Emerging Markets team is made up of eight investment professionals with an average of 11 years investment experience The team benefits from strong and fruitful collaboration with our wider investment team. This is invaluable in providing a broad perspective Global research 15 years investment experience 8 years at Newton Portfolio managers 19 years investment experience 12 years at Newton Global equity Industry analysts Responsible investment Multi-asset & UK Real Return Emerging & Asian equity Robert Marshall-Lee Leader, Emerging and Asian equity team Sophia Whitbread Portfolio manager, Emerging and Asian equity team Credit Fixed income Source: Newton, March 216. Why Newton? Over 2 years experience investing in emerging markets Managing AUD$9.2 billion of assets (as at 31 March 216) for clients including pension funds, corporations and charities around the world Single location of the investment team enables swift and efficient idea generation and implementation Global thematic framework ensures long-term investment perspective Want to find out more? Phil Filippelis Country head phil.filippelis@bnymellon.com BNY Mellon Investment Management Level 2, 1 Bligh Street Sydney NSW 2 Sebastien Brown Portfolio advocate +44 () sebastien_brown@newton.co.uk Limited The Bank of New York Mellon Centre 16 Queen Victoria Street London EC4V 4LA United Kingdom

5 Important information This is a financial promotion. This document is for professional investors only. In the UK, this document is issued by Limited, The Bank of New York Mellon Centre, 16 Queen Victoria Street, London, EC4V 4LA. Registered in England No is authorised and regulated by the Financial Conduct Authority. The opinions expressed in this document are those of Newton and should not be construed as investment 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. 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. Past performance is not a guide to future performance. Except where specifically noted, performance is stated gross of management fees. The impact of management fees can be material. A fee schedule providing further detail is available on request. Newton claims compliance with the Global Investment Performance Standards (GIPS ). Newton, the firm, includes all the assets managed by Limited, Newton Capital Management Limited and Newton Capital Management LLC, which are wholly owned subsidiaries of The Bank of New York Mellon Corporation. To receive a complete list and description of Newton composites and a presentation that adheres to GIPS standards, please contact Newton via telephone on +44 () or via to contact@newton. co.uk. Any reference to a specific country or sector should not be construed as a recommendation to buy or sell this country or sector. Please note that strategy holdings and positioning are subject to change without notice and should not be construed as investment recommendations. The value of overseas securities will be influenced by fluctuations in exchange rates. 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. The MSCI Emerging Markets Index is used as a comparative index for this strategy. The strategy does not aim to replicate either the composition or the performance of the comparative index. The MSCI Emerging Markets Index is a free float-adjusted market capitalisation index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 23 emerging-market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. This material is for n 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 Ltd (AFSL ). This information is confidential and is only provided to n wholesale clients (as that term is defined in section 761G of the Corporations Act 21 (Cth)). This is not an offering or the solicitation of an offer to purchase an interest in the Newton Global Emerging Markets strategy. 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. Limited is exempt from the requirement to hold an n financial services licence in respect of the financial services it provides to wholesale clients in and is authorised and regulated by the Financial Conduct Authority of the UK under UK laws, which differ from n laws. Limited (Newton) is authorised and regulated in the UK by the Financial Conduct Authority (FCA). Newton is providing financial services to wholesale clients in in reliance on ASIC Class Order 3/99, a copy of which is on the website of the n Securities and Investments Commission, 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 n financial services license under the Corporations Act 21 for certain financial services provided to n 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. Newton is providing financial services to wholesale investors in New Zealand in reliance on the Safe Harbour regime under the Financial Markets Conduct Act 213, Schedule 1 part 3. T4116 5/16