Newton has unveiled the Newton UK opportunities fund, an Oeic that aims for growth by investing in a portfolio of between 40 and 50 UK stocks.
The fund manager, John Wood, has the freedom to invest in companies of any size across any industrial sector as he is not bound by a benchmark index. Instead, the fund is run on a best ideas basis, isolating the most attractive stocks whether they fall into the value or growth category. These are likely to be companies with share prices that do not seem to reflect their future profitability, such as British Sky Broadcasting, Prudential and Hays support services.
The stock selection process is based on Newton's investment research, which is conducted by a team of six UK analysts, one smaller companies specialist and 18 global analysts. They will identify themes that fit broadly under the umbrella of growth in a low inflation environment. Examples of themes include outsourcing, where companies hire an outside source to reduce costs, and pricing power, where companies can maintain or increase prices when rival business are reducing their prices.
As there is no benchmark, the fund manager is under no obligation to hold any stock and this makes it more reliant on stockpicking abilities than a general UK fund. It is also higher risk, despite its diversification, because it holds a small number of stocks. This increases the pressure on the fund manager to make the right choices at the right time. But the potential returns may be higher since the fund manager does not have to hold weaker stocks that may dilute the overall performance of the fund.
According to Standard & Poor's. the Newton managed fund is ranked 5 out of 43 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to January 21, 2002.