In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.
This time our interviewee is Newton Investment Management Limited’s portfolio manager Suzanne Hutchins, who manages the Morningstar Bronze-rated BNY Mellon Real Return Fund, and Bronze-rated BNY Mellon Sustainable Real Return Fund, both sub-funds of BNY Mellon Investment Funds.
Which Sector Shows The Biggest Promise in 2022?
The commodities sector. Oil and copper, as well as renewable energy and defence, are sectors seeing greater spending amid increasing market uncertainty and supply chain disruption. We also see opportunities in defensive areas like healthcare and insurers with notable pricing power.
What's The Biggest Economic Risk Today?
A policy decision mistake by central banks and a resulting recession. That is what the bond market is telling you with the two-year/10-year yield curve inversion. There is a growing risk of global central banks raising interest rates too high and too fast. The US Federal Reserve is [well] behind the curve on inflation, for instance.
Describe Your Investment Strategy
We aim to preserve capital with low volatility. To find long-term winners, we look for businesses with long-term structural growth dynamics, which are self-financing market leaders with a competitive cost base that generates cash and allocates capital efficiently.
At a portfolio level, we take a layered approach to the BNY Mellon Real Return Fund’s asset allocation; there is an inner core of diversified, return-seeking assets, while an outer layer with exposure to gold, cash, derivatives and other assets not correllated to equities, stabilises the portfolio. We launched BNY Mellon Sustainable Real Return Fund in 2018. Considering ESG factors in our fundamental analysis, and applying our sustainable "red lines", help us identify sound companies that not only have good balance sheets but value environmental, social and governance issues in how they conduct their business.
Which Investor Do You Admire?
My former team investment leader Stewart Newton. He played a pivotal role in my development as a portfolio manager at Newton Investment Management. Much of his career was during the era of Warren Buffett and, as such, he adopted a strict long-term investment discipline with a clear focus on company fundamentals. It worked.
Name Your Favourite "Forever Stock"
Very few companies can truly be dubbed "forever stocks," but, with a view to the next five years, I believe Microsoft continues to prove its mettle as a high-quality business. It really has positioned itself well in the market for cloud infrastructure services.
What Would You Never Invest In?
Any business or sector I don’t fully understand.
Growth or Value?
It’s important to consider both growth and value, as the price you pay for a stock should reflect its earnings trajectory. As such, we adopt the "GARP" investment approach – growth at a reasonable price – which effectively allows us to take a more balanced weighting of growth and value.
House or Pension?
Pension, because your house is an important part of your pension.
Crypto: Brilliant or Bad?
What worries me about crypto is the lack of industry understanding and standardisation, but I definitely don’t view it as bad – it’s simply an alternative. Blockchain and digital currencies are a particularly dynamic and innovative area of the market, so I’m interested to see how this space develops over the coming years.
What Can be Done to Increase Diversity in Fund Management?
Women are still less likely to invest, so it’s important the industry closes the gender-investing gap, both at the consumer and fund manager level. BNY Mellon Investment Management division, of which Newton Investment Management is a part, recently commissioned a report revealing that if women invested at the same rate as men, there would be at least an extra $3.22 trillion of assets under management from private individuals.
Perhaps more importantly, there would be a $1.87 trillion influx of capital into responsible investment strategies if women invested at the same rate as men. I think more can be done to introduce investing to women at a younger age too, and that can happen in education and through mentoring.
Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?
Neste is a Finnish biofuel producer of renewable feedstock solutions for various polymers and chemical industry uses. The company produces sustainable aviation fuel and renewable diesel, which provides an attractive runway for growth as airlines are becoming increasingly motivated to reduce emissions. We invested in Neste almost nine months ago and are supporting its aim of encouraging customers to use 100% waste-derived feedstock by 2025, phase out palm oil usage, and reduce their greenhouse gas emissions by at least 20 million tonnes annually by 2030. The company is also establishing concrete targets to reduce its Scope 3 carbon emissions, and is looking at elements like green hydrogen to further reduce them as it moves towards 100% renewable electricity use globally.
What's The Best Bit of Advice You’ve Ever Been Given?
Investing is a marathon, not a sprint.
What Would You Be if You Weren’t a Fund Manager?
I studied sculpture and art history at the Slade School of Fine Art and I’m still passionate about both today. I would love to be an artist, or perhaps a professional horse rider (I have my own horses).
