Asset manager Newton has warned investors that the heralded
economic recovery may collapse and the current upward trend
may simply be a sharp spike in a volatile pattern of low
returns that will play out over the next decade.
Peter Hensman, global strategist at Newton, a global asset
management subsidiary of BNY Mellon, said that the team was
"reluctant to share in the current optimism" and dismissed
widespread talk of economic recovery and a long period of
Doubt was cast over current claims that the economy might be
heading back to a pre-credit crunch period, with the
belief that debt, ageing populations and low returns
were as great a problem as ever and would remain so for the
Iain Stewart, Newton’s investment leader,
pointed to other issues including state intervention and the
influence of the unfolding Chinese slowdown, which he
said would further complicate the global economic
Stewart was particularly wary about the effect of
quantitative easing (QE), explaining that it was likely to
create distortions throughout the economy.
He was damning of the portrayal of QE by governments as a
"helicopter drop of money spreading evenly into the economy".
Pointing to stagnant earnings despite rising equity prices,
Stewart argued that the opposite was true as QE was creating
greater economic disparity.
Stewart went on to argue that QE combined with "the largest
collective debasement of currency ever" and a widespread
perception of recovery, was likely to lead to asset
Newton’s answer was to continue backing a
cautious portfolio, which maintains confidence in gold as a
long-term security, despite it falling by 28% during 2013.
Over the past 10 years the Newton Real Returns
portfolio, a £9bn ($15.3bn) fund that has just passed
its 10-year anniversary, has had a reduced focus on
high-yield investments and investment in financials,
utilities and industrials in favour of health care and
Helena Morrissey, CEO, summed up Newton’s
strategy for the fund as an "alternative to alternatives" and
noted it had outperformed the MSCI World Index over the
past 10 years.
Newton has some direct exposure in emerging markets,
particularly in technology and telecoms, but investment
manager James Harris admitted to not being overly optimistic
about such markets.
"There are a lot of great opportunities," said Harris, but he
noted there were also a lot of problems. For
example, he noted China was far more distorted by
government policies, and therefore more difficult to predict,
than the West.