Bestinvest says
The fund’s yield was reduced in 2011 but it remains one of the highest dividend payers in the sector, boosted by strict yield criteria and selected use of covered call options. Though this is a UK fund, Newton’s analysts look at stocks globally, an important attribute when an increasing number of companies operate internationally. Both the fund manager and analysts benefit from themes identified by Newton’s strategy team – for instance, the team were negative on western banks well in advance of the 2008 financial crisis. This, in addition to the yield constraints, typically provide a degree of protection from falling markets but can lead to the fund underperforming strongly rising markets.
The fund’s investment universe comprises all of the companies in the FTSE All Share, but in practice the portfolio is almost entirely made up of large and mid cap stocks due to liquidity. The universe is further restricted to around 150 companies by the fund’s strict yield criteria – only stocks yielding at least 15% more than the FTSE All Share can be included, whilst any portfolio company whose yield drops below that of the index must be sold.
The portfolio is partly derived from the Newton UK equity team’s model portfolio, which is in turn derived from the recommendations of Newton's London based global sector analysts. The fund will typically have 50-60% overlap with the UK model, with the remainder comprising other high yielding stocks in the universe selected by the fund manager. However, she will always research these in conjunction with the analyst team.
The entire stock selection process is informed by Newton's strategy group, which attempts to identify long term trends such as the credit boom. Analysts and managers focus their research on companies which will benefit from these trends.