Mark Hammond: Thank you for watching this short video, the purpose of which is to give you an update on how our Real Return team has been evolving recently, and to introduce our most recent recruit Andy Warwick. First of all, Suzanne, perhaps you could give us some background on the evolution so far.

Suzanne Hutchins: We’ve outlined the evolution of the team, with Iain Stewart transitioning to focus on his strategic role on the strategy, and I’m taking over the responsibilities of the human management of the team as well as the regulatory responsibilities that come with that as well. At the time, we also said that we’d be looking to add resource to the team and add to the bench strength and, in so doing, we’ve hired Andy to join us. Andy joins as co-lead manager on the strategy, alongside Aron [Pataki] and myself, and he joins at interesting times – the performance of the strategy has picked up despite the challenging market conditions. So welcome Andy!

Andy Warwick: Thank you.

MH: So Andy, it’s great to have you here. Can you tell us a bit about your background and experience and why you decided to join the Real Return team here at Newton?

AW: So I’ve been managing multi-asset portfolios for 20 years, the past 13 years at BlackRock, where I was responsible for both absolute-return and relative-return management. I was also co-fund manager of the Blackrock Dynamic Diversified Growth strategy, which competed directly with the Newton Real Return strategy, and that’s how I came to know about the team and the strategy they were running. There are a number of reasons for why I joined the team and took on the opportunity. The process and philosophy are very similar to how I think about the world and how I manage portfolios, but it’s also very exciting the way that Newton thinks about both the macro and also the bottom-up stock analysis, and I think that’s an area that we didn’t focus on at my old shop, and that’s something that really excites me – being able to marry these two together to really generate alpha for our clients.

MH: So what specifically do you think you bring to the team?

AW: Well, my investment strengths I suppose are macro themes, equities, derivatives and portfolio construction. So as an example, when I looked at the [Global Real Return] portfolio, I felt that if the market should carry on rallying against our view that we would maybe not capture all that upside, so we implemented a strategy that enabled us to do that, to partake in the upside but not give up any of the protection on the downside.

MH: Suzanne, that’s interesting. Can you perhaps give us a sense of the wider elements of change and evolution within both the team and the wider investment environment here at Newton at the moment?

SH: Sure, well I mean the first thing to say is that the investment process and philosophy of the strategy hasn’t changed and it's not going to change. So we have launched a Real Return sustainable strategy, and this is one of a number that we have launched across the whole of Newton, and it actually is part of our environmental, social and governance that we fully integrate into our investment process. What we’ve also done is invested quite significantly in the areas of technology, and that’s with the support of our CIO [Chief Investment Officer] Curt Custard, so particularly in the areas of risk systems, portfolio construction, which really enables the portfolio managers to help efficiently construct the portfolios and certainly an additive to our process, but overall obviously our process is unchanged.

MH: There’s been a lot of evolution and innovation in our industry, and also in the absolute-return environment itself – perhaps I can ask Andy, how do you think you can exploit some of those developments here at Newton?

AW: Well you’re right, our industry is continually evolving, both in how we look at opportunities in the world as well as how we implement them. One area that really excites me is the way they look at the world from a thematic basis, whether that sort of ‘bigger picture’ view, such as ESG or Earth Matters, through to more targeted focused areas like the ever-increasing emerging-market consumer wealth. These are areas that can help us really hone in on investment ideas. From an implementation standpoint, I just consider that these are just additional tools to have in our toolkit: an electrician wouldn’t turn up to a job with just a screwdriver; they’d have an assortment of tools to do the task, and it should be no different for asset managers. The end result is really to generate a better client experience.

MH: Now you’ve only been with us for a very short amount of time and I know you’re still getting to know the wider team here at Newton and all the analysts, but was there anything about the portfolio and its structure that you’d seek to change immediately?

AW: The short answer is no; I think the portfolio is positioned in line with my sort-of cautious outlook of the world. If anything I think the risk to that view is that the cycle just carries on extending – President Trump introduced tax cuts, aggressive tax cuts, which has extended the cycle, and he could do more; he could do a huge infrastructure spend for example, which will extend the cycle even more.

Unfortunately, this will build up to become an even bigger bust when it does occur, so I’m constantly thinking about how can we keep that cautious capital-preservation thought process in line but still capture some of that upside.

MH: So in summary, Suzanne, where do you see the opportunities to add value for our clients at the moment?

SH: Well, we think about making returns through the cycle, and right now we do believe that we are more towards the end of the cycle, so we wouldn’t be chasing returns at this point in time, just because of the level of risks that that would incur. But, that being said, there are always going to be opportunities, and in very volatile market conditions with a liquid portfolio that is flexible, that can invest in the underlying securities with conviction, I think that we can add a lot of value to our clients over the longer term.

MH: Well thank you both very much indeed for that update, and welcome Andy.

AW: Thank you.

An introduction to the Real Return strategy’s new recruit Andy Warwick.