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Iain Stewart to retire

5 Aug 2019

Clients may have read on Friday that Iain Stewart is to retire from Newton on 31st December 2019. He was the main fund manager on the Real Return strategy since launch. We downgraded the fund from Tier 1 to Tier 2 around 18 months ago, which was in part down to Iain handing over responsibility to others. The following was sent to us by Newton in 2017 and we shared it with clients: In early 2018, Suzanne Hutchins will take on the Real Return desk reporting lines, freeing Iain up from this. At the same time, Newton will formally move to a co-lead structure on the Newton Real Return Fund. This new co-lead managers will be Suzanne Hutchins, Iain Stewart and Aron Pataki. It is also in keeping with the approach of other strategies at Newton, and is pertinent given the team-based approach Newton has always adopted. Then, as we move into the third quarter of 2018, Iain will move away from day-to-day co-lead management of the Newton Real Return Fund, and will focus on top-down strategic input and working with the team on the overarching direction of the strategy. Iain is also reducing his time from 4 days a week to 2.5 days a week, with immediate effect.   

This was our own comment that was shared with clients at the time: Firstly, we have met Suzanne and Aron and they seem competent and are longstanding teammates of Iain’s. Newton suggest that this co-lead structure had already taken effect anyway. Perhaps this is true, but the fact it coincided with some portfolio positioning changes made us sceptical. Also, it seems that Iain is slowly working himself out the system and he will be a loss. The formative years of the fund during the GFC were navigated well by Iain. Also, we find the timing of these changes to be strange given the short-term performance challenges. Is Iain being pushed out? Probably not. So, why make these changes, particularly to Iain’s time, when clients have had poor returns? We cannot understand this. With Iain working fewer days a week and announcing that he is moving away from co-management in 2018, it is hard to see how this will be better for clients. And even if the current changes reflect what was effectively in place, the message it sends clients may be a poor one. On a principle / behavioural basis at the time, when performance was very poor, we struggled with the message this seemed to send and the lack of empathy for end clients who were enduring significant underperformance. Iain’s role change was, in part, behind us downgrading the fund.

So what is our view today? It remains largely unchanged. We have monitored the team closely and met them numerous times in the past two years. We have felt that the handover from Iain to his colleagues has happened in a fairly ordered way, although our preference would have been that Iain stayed through a bear market and then retired, because we believe the team are not fully tested in this environment (in Iain’s absence). We also acknowledge that Iain kept things quite simple, when it feels like his colleagues are more committed to investing in slightly more complex instruments. So, the rating of Tier 2 still feels right. The team is competent and has been quite longstanding alongside Iain, but we have some smaller reservations. We wish Iain well as he retires, having left a strong legacy of real return at Newton and in the market more generally.

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