Wilmot was named as the lead manager on the fund earlier this week, taking over from Tineke Frikkee at the start of next week. Frikkee is now “in discussion” with the asset manager about her role at the company.
A number of changes were announced concerning how the portfolio will be managed to allow greater potential for growth and provide an attractive total return to investors. Under the change, the fund’s yield will be steadily reduced while its buy and sell discipline will be widened.
In an investor update, Wilmot said: “In terms of the proportion of the portfolio that we’ll need to change, I think it’s going to be around 50%.
“We’ve done a lot of work on this, we’ve analysed liquidity and market impact, and we believe there will be negligible impact in terms of transaction costs or market impact.”
Wilmot will not start amending the portfolio until 7 February 2013 and expects to complete the changes by the end of June. The move was given a wide window in recognition of the market’s volatile nature and ensure changes are made at a time beneficial to unitholders.
The manager added that the changes were made to address a number of problems with Newton Higher Income Fund. This include an excessive income level, an absence of capital growth and the risk of a high dividend yield trap, all leading to suffering total return.
As a result of the new approach, the fund’s investable universe will increase from its current 60 stocks to around 160 names. It will also use more opportunities to invest in overseas companies.
“What this will allow is the fund to move much more towards the heart of the investment process at Newton, which has delivered strong results for many other strategies over the years,” Wilmot said.
