BNY Mellon Multi-Asset Income

This fund seeks to achieve a stable income with the potential for capital growth over the long term (five years of more) by investing in equities, bonds and alternatives. It is part of a wider multi-asset range and uses the full power of Newton’s 130 investment professionals to invest in any geographic or economic sector in the world.

Our opinion

This unconstrained and flexible multi-asset vehicle taps into the huge resources at Newton to offer investors a stable and growing income, as well as capital growth. Paul and the team have shown themselves to be extremely competent at finding opportunities across various asset classes without overreaching for income – which can often come at the expense of capital growth. We also like the use of Newton’s global investment themes combined with rigorous fundamental analysis. Since launching in 2015, the fund has been a consistently strong performer, whilst maintaining an attractive yield.

Company description

This fund is run by Newton Investment Management but under the BNY Mellon branding. BNY (Bank of New York) Mellon operates as a ‘multi-boutique’, using its size and strength to provide support and global reach to a range of more specialist investment houses. Operating across 35 different countries, the firm has $1.8trn of assets under management.

Newton itself is a UK-based investment management firm, established in 1978. It runs a variety of institutional and retail mandates spread across equity, fixed income and multi-asset strategies

Fund manager

Paul Flood is a portfolio manager and strategist at Newton. He is lead manager of both this and the Newton Multi-Asset Diversified Return strategy, as well as providing input and analysis on asset allocation, derivatives and convertible bonds for the wider house. Paul joined Newton in 2004, prior to which he worked at Mellon Investment Funds Europe as a unit trust dealer. 

Paul FloodFund manager

Investment process

This is a well-diversified portfolio typically holding 120-140 securities, with each individual investment needing to offer an attractive return and income to qualify for the portfolio. This is a portfolio of directly invested holdings in companies (it does not invest in other funds).

Stock selection is determined by four specific factors – global themes (such as clean energy or deglobalisation); company fundamentals (such as a company’s balance sheet/business model); a strong and improving ESG footprint; and valuations.

The team will talk to the wider research desk at Newton when evaluating potential equity and bond positions (the latter includes government, corporate, high yield and emerging market debt bonds).

The alternatives exposure has been a constant part of the portfolio since launch. This is run within the multi-asset team, with the alternatives split into two specific buckets. The first bucket is structured returns – this covers areas like renewables, infrastructure, shipping finance and royalties, where the team sees fixed inflation revenue streams and power price related revenues. The second bucket covers unstructured returns – this includes the likes of private equity, hedge funds and catastrophe bonds – these are avoided as the team believes they are unattractive from a risk/reward perspective.

It is standard practice for the team to meet management. This is particularly important from an income perspective, where it wants to feel comfortable that dividend payments are transparent and secure.

This all feeds back to delivering a strong, stable and growing income. The fund has no biases from a geographical perspective but is likely to have an overweight to developed markets, given the wider availability of dividend paying companies.

ESG

ESG-Integrated
Responsible investing has been a feature of the Newton Investment Management approach for over four decades. The team has been a proxy voter since the 1970’s, as well as being one of the first signatories for the Principles for Responsible Investment.

The managers behind this fund want to make sure they are getting paid for all of the risks they are taking – this includes risks around governance and penalties for failing on environmental aspects.

The most important part of the ESG focus will be governance – as the team believes strong governance means management is more likely to take care of both the environmental and social footprints of their business.

However, this does not mean the fund cannot hold a company with ESG challenges. For example, the team may hold an oil & gas company if it feels the valuation is low enough to compensate for issues like carbon taxes or oil spills.

Risk

The main risks on this fund are focused around stock selection and asset allocation. The fund invests globally, meaning there are both currency fluctuations and the additional volatility of investing in emerging markets to consider. Bond holdings can also be impacted by changing interest rates.

The firm does have an independent risk team that evaluates style and valuation biases that run through the fund. There is also a constant focus on asset correlation and liquidity.

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