New fund with 64% equity weighting

FUND MANAGER Q&Awith JAMES HARRIESNewton Investment Management

James Harries is the fund manager of the new BNY Mellon Global Real Return Fund, which was launched into the Irish market this week in association with New Ireland.

Before working on the Global Real Return Fund, Mr Harries worked in Newton’s private investment department, and managed the Newton Falcon Fund.

What is your investment approach?

We’re trying to produce a reasonable return, which we’re defining as Euribor plus 4 per cent, over five years, with a volatility between that of bonds and equities. We’re trying to do that by holding a core of return-seeking assets and surrounding those with offsetting positions to reduce the volatility of the return.

We have a 64 per cent equity weighting at the moment, which is very much targeted at large cap, highly-financed, dependable businesses. We have around 18 per cent in bonds, which is almost entirely corporate debt. About 6 per cent is allocated to commodities, predominantly gold, and about 8 per cent is in cash.

To offset those risk positions we hold some derivatives such as index puts, some long bond calls and some US dollar calls.

How has your fund performed?

The euro version of Global Real Return Fund was only launched very recently, but the sterling-denominated version of the fund has produced a positive return in each of the last five years (including 2008). The annual return over that period was 9.5 per cent.

What is your outlook?

We have quite a traditional asset allocation at the moment as we have a fairly cautious view in relation to the global economy. We think the credit crunch is probably not over just yet, and it’s possible that the next position of stress could be sovereign balance sheets.

* Newton Investment Management is a London-based subsidiary of BNY Mellon

In conversation with Caroline Madden

• www.newton.co.uk