Jon Bell may be reluctant to predict where global markets will go in 2010, but he is confident he can find reasonably priced companies.
"That makes me positive about our ability to generate decent returns for our investors," says Bell, 37, a member of the team that manages the $576-millionTD Global Select. He is director of investment management for Newton Investment Management Ltd., a London, England-based subsidiary of BNY Mellon Asset Management.
"As to what exactly will happen to markets, I'm not certain," Bell says. "But equities look like good value, relative to other asset classes. You just have to make the choice of the right equities."
Bell works closely with James Harries, Paul Markham and Robert Hay, fellow members of the global equity team that oversees the fund. Importantly, they conducted a near-complete overhaul of the fund as Newton assumed the mandate last August from New York-based OppenheimerFunds Inc. The number of names remained the same, at about 100, although the team applied its thematic approach, which is used for about 60 other clients.
"You need to have a perspective on the world," says Bell. "There are a number of ways you could achieve that perspective. You could make some spot economic forecasts, for instance, which we think is pretty difficult to do. Some people use quantitative-type models, which we believe is backward-looking and can miss changes taking place. Instead, we achieve our perspective through themes."
The themes are Newton's interpretation of forces of change driving markets and economies. "We are not predicting what will happen in the future, but trying to determine the most important themes that are shaping the investment landscape, so we can build a global portfolio," says Bell, adding that the team is backed by 19 equity analysts who provide their 10 best ideas that fit into the thematic framework.
The themes are used to give the managers a long-term outlook, and avoid focusing too much on short-term volatility. "We're looking at a three- to five-year time horizon," says Bell, noting that typically there is 50% to 70% turnover. Single holdings are limited to about 3% to 3.5% of fund assets.
While there are 16 distinct themes, there tends to be some overlap. Among the closely tied themes are global realignment and developing economies. One theme, known as "All Change," is an overarching one that covered the credit crisis and, according to Bell, helped Newton avoid some of the 2008 blow-up of the financial sector.
"The banks are on a sounder footing today, but they are facing tighter regulation, [require] more capital and [will generate] lower returns," says Bell. "We are cautious on the financial space."
Newton has some exposure to banks in the developed countries, such as BNP Paribas SA. But it is allocating more exposure to banks in emerging markets, such as Singapore's DBS Bank Ltd. "The developing world banks are on higher valuations. That does not particularly concern us. Their fundamentals are much better, since they are exposed to better economies, where there is genuine growth," says Bell, noting that emerging markets stocks account for about 15% of the fund.
An Edinburgh native, Bell has been in the industry since 1995. That was when he graduated from Cambridge University, where he obtained a MA in natural sciences. Bell got a taste of the fund management industry in a summer placement at Stewart Ivory, in Edinburgh. That led him later to Newton where he began working for the equity team and analyzed technology companies. "I was effectively shadowing the portfolio manager, and absorbing the process."
Between 1996 and 1999, Bell helped manage a U.S. equity portfolio. In 1999, he assumed a global equity portfolio with a dominant UK weighting. Two years ago, he joined the so-called pure global equity team. Global equities account for 36% of Newton's $69 billion in assets under management.
The 3-star rated TD fund returned 1.8% for the quarter ended Dec. 31, moderately below the 2.6% return for the median fund in the Global Equity category. It matched the median return of 15.5% for the calendar year, although its performance is only partly attributable to Newton.
Newton also acts as sub-advisor to Oakville, Ont.-based Integra Capital Ltd., and manages the $48.3 million Integra International Equity and the $268.1 million Integra Newton Global Equity.
In the search for well-capitalized and attractively valued companies, Bell maintains there is much to choose from. One example is Millicom International Cellular SA ( MICC). The company, which operates in Latin America and Africa, fits within two themes: the developing economies and networked world.
Bell notes that Millicom has intimate knowledge of its customers, and their spending patterns. "They can offer enhanced services, such as money transfer," says Bell, noting the stock is likely to remain a core holding even though its share price has risen appreciably in the past year. "They don't see themselves as a technology company, but as a provider of consumer goods."
