Well-known manager James Harries (pictured) will leave Newton and therefore step down as manager of the £4.5bn Newton Global Income fund, according to an announcement made this afternoon. 
The manager will leave the firm, which is part of BNY Mellon Investment Management, to pursue an opportunity at boutique asset management firm Troy.
Nick Clay will assume the role of manager, having been at Newton for 15 years. He is currently the chair of the firm’s equity income group and the management process and technique of the fund is set to remain unchanged according to a spokesperson at Newton.
Ian Clark, a specialist global research analyst on the Global Equity Income team, is also set to maintain his existing role on the team and he will work alongside Terry Coles, a global equities investment manager who will become alternate manager on the fund.
Helena Morrissey, chief executive officer of Newton, said: “Newton has long incorporated a strong team-based approach. We believe that Nick, Terry and Ian have built a strong reputation for excellence within the industry and have consistently proven to be talented investors.”
Performance fund versus sector and index under Harris
Source: FE Analytics
Harris has built up a decent following of investors due his outperformance over the years, which stems from his thematic approach and focus on downside protection. Therefore, many investors in the fund may well be concerned about this change.
Adrian Lowcock, head of investing at AXA Wealth, says that investors shouldn’t sell their positions because of the management change and says that the fund is likely to remain similar in its style.
“It is important investors focus on the facts, James’ main role was on the long term economic outlook with the fund following Newton’s in-house thematic approach. Given this is a long-term, fairly cautious fund and Nick Clay is taking over the reins I expect little will change in the short term.”
Harries will be starting at Troy in 2016 but for those investors who are looking to opt for something different rather than following the manager or want to use this announcement as an opportunity to review their exposure, the article below explores three alternatives to Newton Global Income as picked by a panel of financial experts.
“The global income space is very competitive. Another fund we like in that space that is different in style is the Artemis Global Income fund, which has been managed by Jacob de Tusch-Lec since launch,” Apollo’s Ryan Hughes said.
“It’s done very well, he’s very much a stock-picker and a pragmatist and I would consider that a very credible alternative to Newton, although it is a very different type of strategy.”
Since its launch in 2010, Artemis Global Income has returned 96.88 per cent, outperforming its sector average and its MSCI AC World benchmark by 41.49 and 39.68 percentage points respectively.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
The manager also adopt an unrestricted approach in terms of cap-size, industry and geographical allocation in his £2.5bn fund. However, this means the fund has tended to be a more volatile proposition than the Newton offering.
Nevertheless, Jason Hollands, managing director and business and communications at Tilney Bestinvest, would also consider the fund for its bottom-up approach.
“Not only is the fund unconstrained, it adopts a very clever approach in that it hedges its currency exposure in line with the global index,” he explained.
Hughes added: “Newton Global Income’s long term track record is great, and if I were to advocate anything, it would probably be to carry on holding Newton if you already have it and then look to diversify with someone like Jacob because I think the two funds complement each other really well.”
“It’s a bit of a surprise, but I’ve met Nick Clay who is taking over the Newton fund numerous times and he is a very solid replacement, so there is absolutely no problem with him taking over in the first place.”
Artemis Global Income has a clean ongoing charge figure (OCF) of 0.84 per cent and yields 3.81 per cent.
Veritas Global Equity Income adopts a much more similar approach to Newton Global Income, in that it is relatively defensive and will invest in larger stocks.
Its largest regional weighting is currently continental Europe at 35 per cent, followed by Asia Pacific at 26.7 per cent, the UK at 23 per cent and North America at 11.2 per cent. The fund also has smaller positions in the Middle East-Africa and the Americas.
“The managers of the Veritas fund are ex-Newton, so there are similar underlying investment themes. That’s where, if I were a holder of Newton Global Income, I would naturally start to look, given the similarity and the origins of those managers,” Premier’s Simon Evan-Cook explained.
“Global Equity Income isn’t an area we hold because we tend to buy regional mandates, but in the past I have looked at global income funds and the Veritas fund is run in a fairly similar manner to the Newton fund.”
FE Alpha Manager duo Andy Headley and Charles Richardson have run the £2.4bn fund for more than a decade and, over this time frame, it has returned 108.78 per cent, outperforming its peer average by 10.84 percentage points but underperforming its MSCI World benchmark thanks to a period of relatively poor returns over the past two years.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
Over this time though, it is in the top quartile for its annualised volatility and its maximum drawdown, which measures the most an investor could have lost if they’d bought and sold the fund at the worst possible times.
It has a Square Mile rating of AA, which has been awarded for its strict screening process, its decent returns and the managers’ lack of concern regarding the replication of its benchmark’s exposures.
“The fund will almost inevitably lag towards the end of a bull market when valuation metrics become too rich but one of the keys to the success of the strategy is the managers' ability to deploy cash reserves once valuations correct and become more attractive,” the team said.
Veritas Global Equity Income has a total expense ratio of 1.16 per cent and yields 4.4 per cent.
Saracen Global Income & Growth
Another potential option would be Saracen Income & Growth, which is managed by David Keir and Graham Campbell.
It has also made it onto Square Mile’s list and has been awarded an ‘A’ rating for its ability to both generate income and accumulate capital.
“As the team's emphasis is upon revenue, profits and dividend growth rather than solely high yielding companies, the fund may well have a lower headline yield than many of its global equity income peers,” the team explained.
“However, because of this it also has the ability to generate strong income growth over time. There is a clear and understandable modus operandi in place, with the team aiming to invest in global leaders that have the propensity to continue to grow over the next five years.”
The team adds that the managers balance this with a focus on the risks to the investment case, and says they will not invest if the worst case scenario appears too bleak.
Since its launch in 2011, the £50m fund has returned 35.49 per cent, outperforming its peer average by 1.87 percentage points.
Performance of fund vs sector since launch
Source: FE Analytics
Saracen Global Income & Growth has a clean OCF of 1.02 per cent and yields 2.9 percent.
