July 28, 2011

A Global Portfolio Should Generate Better Risk-Adjusted Returns, Newton Study Says


Go Global Investment Approach Suggested by BNY Mellon Firm

NEW YORK and LONDON, July 28, 2011 — A domestic bias continues to characterize the majority of U.S. investment plans, according to a recent study by Newton*, part of BNY Mellon Asset Management. A global approach across bond, equity and multi-asset portfolios could better serve investors' risk and return objectives, the report suggests.

"Neither a bias against overseas investment, nor the demarcation of investments between domestic and international portfolios is appropriate in seeking fully to understand, manage or harness risk to the benefit of investors," said Paul Markham, global equity portfolio manager at Newton.  "Country risk is an important factor for investors to consider, but many of the risks to which investors are exposed are global in nature."

According to Newton, investment opportunities, corporate revenues and earnings, accounting standards and capital markets are increasingly global in nature.  Globalization is evident in patterns of returns from equity markets; stock-market sectors are performing more similarly, regardless of the markets in which they are located, the report notes.  The report also states that the rising correlation between the performance of U.S. and non-U.S. markets reflects the global nature of opportunities.

"A global approach can provide the perspective that allows an investment manager to screen out the 'noise' that frequently characterizes financial markets, and to identify the enduring themes that really matter in identifying investment risks and opportunities," Markham continued.  "We anticipate that overseas markets will provide highly attractive opportunities to U.S.-based investors in the years ahead."

The report further states its belief that currency risks are not aligned with an investor's geographic exposure and that historically, the correlation between movements in the U.S. dollar and U.S. equity market performance has been weak.  Newton also believes corporate governance considerations cannot be made along geographic lines alone; corporate governance standards vary as much between one sector or company and another, as between one region or country and another.  

"While we equate the case for a global approach with global portfolio construction, many of the assertions we make are applicable to most investors, including those who, for whatever reason, choose to separate their domestic and overseas investments.  Even when investing on a purely domestic basis, we believe a global mindset is indispensable," Markham concluded.  

The complete Newton report is available at www.newtoncapitalmanagement.com/whyglobal

Newton* is a London-based global asset management subsidiary of The Bank of New York Mellon Corporation and part of BNY Mellon Asset Management. With assets under management of more than $76 billion, including assets managed by Newton Investment Management Limited as dual officers of Newton Capital Management Limited and The Bank of New York Mellon, Newton's group of affiliated companies provides a broad range of award-winning investment products and services to individuals, pension funds, charities and corporations. News and other information about Newton is available at www.newton.co.uk.

BNY Mellon Asset Management is one of the world's leading asset management organizations, encompassing BNY Mellon's affiliated investment management firms and global distribution companies. Information about BNY Mellon Asset Management can be found at www.bnymellonam.com.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $26.3 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available at www.bnymellon.com and through Twitter @bnymellon.

*'Newton' refers to the following group of affiliated companies: Newton Investment Management Limited, Newton Capital Management Limited, Newton International Investment Management Limited, Newton Capital Management LLC and Newton Fund Managers (CI) Limited. Assets under management include assets managed by all of these companies except Newton Capital Management LLC, which provides marketing services in the U.S. for Newton Capital Management Limited. Except for Newton Capital Management LLC and Newton Capital Management Limited, none of the other Newton companies offer services in the US and Canada. Newton Capital Management Limited is an investment management firm authorized and regulated in the United Kingdom by the Financial Services Authority in the conduct of investment business and is a wholly owned subsidiary of The Bank of New York Mellon Corporation. Registered in England no: 2675952. Newton Capital Management Limited is registered in the United States as an investment adviser under the Investment Advisers Act of 1940. Unless otherwise stated, all information source BNY Mellon Asset Management as at 30 June 2011. This press release is qualified for issuance in the UK, US and Canada and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorised. This press release is issued by BNY Mellon Asset Management (US & Canada) and BNY Mellon Asset Management International Limited (ex-US/Canada) to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance. Registered office of BNY Mellon Asset Management International: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorised and regulated by the Financial Services Authority. A BNY Mellon Company(SM)