For many fund managers, 2007 was a year they would rather forget. However, the story was quite different for Newton. Newton’s unique thematic approach ensured that the company was not only able to successfully navigate the market turmoil of 2007, but to also deliver one of the best years of relative performance in its history.

The first quarter of 2008 was a very challenging period for global stock markets with the FTSE All World Index falling 9% and the FTSE All Share falling close to 10%. During the period Newton maintained its thematic approach and continued to broadly avoid investing in western banking stocks and to favour sectors with strong visible earnings such as telecoms. While both of these decisions detracted from relative returns over the period, Newton remains convinced of the long-term benefits of this and of its continuing preference for larger company stocks. Despite its challenges, the first quarter of 2008 did little to impact upon the longer-term performance generated by Newton's thematic approach.

Over the year to 31st March 2008, all of Newton's funds in the IMA UK All Companies sector and the IMA Global Growth sectors remained high in the first quartile. These results were echoed by a number of Newton's international equity funds while the performance of funds such as Newton Absolute Intrepid Fund, Newton Managed Fund and the Newton Phoenix Multi-Asset Fund, which combine both equities and bonds, was just as impressive.

This theme focuses on how a period of almost two decades of falling inflation helped to foster a "supercycle" of credit growth in many western economies. The record levels of corporate and individual borrowing that resulted in these economies is in stark contrast to that prevailing in the developing world where savings rates remain high. In many instances this theme resulted in Newton's managers all but avoiding western banking stocks as well as those companies exposed to western consumers. Consequently, this theme helped Newton to substantially outperform its peers in 2007.

This theme examines how western industrialised nations currently dominate the world's GDP, wealth, consumption and market capitalisation, as well as consuming the lion's share of natural resources. It argues that the sustained growth and increasing economic influence of the developing world will progressively challenge this position. For some years, this idea has led Newton's managers to heavily bias their portfolios towards the markets of Asia and Latin America either directly or through companies with heavy exposure to these areas. This theme continues to drive strong outperformance right across the Newton fund range.

This theme looks at how the industrialised world has witnessed significant declines in the volatility of both the business cycle and financial markets in recent years. As with any sustained trend, many investors have been lulled into believing this lower volatility to be permanent. The attitude to risk and asset prices that this generated led to prices in many areas of the market becoming unduly inflated. Among other things, this theme resulted in Newton avoiding real estate and related stocks in 2007, which proved to be another significant source of outperformance.