Equity Market Volatility: 'We're well positioned'

With equity markets continuing to face volatile trading conditions, 2008 is likely to be remembered as a challenging year. However, we are confident that our relatively cautious stance will allow us to ride out the market turbulence.

A challenging market
The relatively long-standing problems in the US sub-prime mortgage market and the weakness in the US housing market have cast a shadow over the US economy. Some commentators even claim that the US has already entered into a recession. Meanwhile, the US Federal Reserve has demonstrated both its concern over the state of the US economy and its determination to fight off a recession with its recent dramatic cuts in US interest rates (2.25% year-to-date).

While equities in general have delivered negative returns so far this year, some sectors look more appealing than others.

Defensive positioning
Fortunately, our thematic approach allowed us to position our Funds relatively well prior to the recent market downturn.

For example, Newton's theme of 'debt and credit', which is predicated on the idea that western consumers are over indebted, led us to have a lower equity weighting in western banks well before the turmoil in credit markets caused a significant sell-off in banks. Meanwhile, we also felt that some of the more cyclical areas of the market had become overvalued in 2007. Hence another cyclical position which is likely to help our performance is our underweight to mining stocks.

For example, Newton's theme of 'debt and credit', which is predicated on the idea that western consumers are over indebted, led us to have a lower equity weighting in western banks well before the turmoil in credit markets caused a significant sell-off in the sector.

Elsewhere, we have exposure to more defensive sectors such as utilities and tobacco, which are supported by stable cash-flows and dividends.

Looking ahead...
Selective stocks may have been oversold in the sell-off, creating buying opportunities for our Fund managers.

In a difficult global economic climate, good stock picking, underpinned by our thematic approach, will be the key in the year ahead. We will continue to invest in companies with strong cash flows and solid fundamentals.

Important Information
This is a financial promotion and is not intended as investment advice. The information provided within is for use by professional investors and should not be relied upon by retail investors.

All information relating to Newton Investment Management Limited has been prepared by Newton Investment Management Limited for presentation by BNY Mellon Asset Management International Limited. Any views and opinions contained in this document are those of Newton Investment Management Limited at the time of going to print and are not intended to be construed as investment advice. BNY Mellon Asset Management International Limited and its affiliates are not responsible for any subsequent investment advice given based on the information supplied.

This document may not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised. Past performance is not a guide to future performance. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. The Full Prospectus should be read before an investment is made. This document can be obtained from www.bnymellonam.com. To help us continually improve our service and in the interest of security, we may monitor and/or record your telephone calls with us. Changes in the rates of exchange may affect the value of investments. Tax treatment will depend on the individual circumstances of clients and may be subject to change in the future.

BNY Mellon Investment Funds is an Investment Company with Variable Capital incorporated in England and Wales under registered number IC27 and is authorised by the Financial Services Authority. BNY Mellon Fund Managers Limited (BNY MFM) is the Authorised Corporate Director. BNY Mellon Fund Managers Limited, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1998251 Authorised and regulated by the Financial Services Authority. The investment adviser of the Newton sub-funds is Newton Investment Management Limited (NIM). Investments should not be regarded as short-term and should normally be held for at least five years.

Changes in the rates of exchange may affect the value of investments. Certain funds can invest in overseas securities which may also generate profits overseas and pay dividends in foreign currencies, which means certain funds are exposed to changes in currency rates. Certain funds may invest in emerging markets. It should be noted that these markets have additional risks associated with local custody and registration practices that may be less developed than more mature markets. Certain funds take their charges from the capital of the fund. Investors should be aware that there is potential for future capital erosion. Certain funds have a concentrated portfolio of stocks due to investment in a single country or geographic area/limited industry diversification or investment in a limited number of securities, giving rise to concentration risk. Certain funds may invest in smaller companies. Smaller companies may be riskier and less liquid than larger companies. This means that their share prices may be more volatile. Certain funds may hold sub-investment grade bonds that typically have a low credit rating and carry a high degree of default risk, which can affect the capital value of your investment. All of the sub-funds may use derivatives for efficient portfolio management (EPM) purposes. EPM restricts the use of derivatives for the reduction of risk, the reduction of cost and the generation of additional capital or income with no or an acceptable low level of risk. EPM transactions must be economically appropriate and the exposure fully covered. Certain funds will, additionally to EPM, make use of the expanded regulations and use derivatives in pursuit of their investment objectives. All of these factors may affect the performance of funds.

This document is issued in the UK and in mainland Europe (excluding Germany) by BNY Mellon Asset Management International Limited. BNY Mellon Asset Management International Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Services Authority.

In Germany, this document is issued by WestLB Mellon Asset Management Kapitalanlagegesellschaft mbH, which is regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. WestLB Mellon Asset Management was formed as a 50:50 joint venture between The Bank of New York Mellon Corporation and WestLB AG. If WestLB Mellon Asset Management Kapitalanlagegesellschaft (WMAM KAG) receives any rebates on the management fee of investment funds or other assets, WMAM KAG undertakes to fully remit such payment to the investor, or the Fund, as the case may be. If WMAM KAG performs services for an investment product of a third party, WMAM KAG will be compensated by the relevant company. Typical services are investment management or sales activities for funds established by a different investment management company. Normally, such compensation is calculated as a percentage of the management fee of the respective fund, calculated on the basis of such product’s fund volume managed or distributed by WMAM KAG. The amount of the management fee is published in the prospectus of the respective fund. Any compensation paid to the WMAM KAG does not increase the management fee of the relevant fund. A direct charge to the investor is prohibited. In Germany, the prospectus is available from JPMorgan AG, Junghofstrasse 14, 60311 Frankfurt Am Main.

BNY Mellon Asset Management International Limited, BNY Mellon Fund Managers Limited (BNY MFM) and Newton Investment Management Limited are all ultimately owned by The Bank of New York Mellon Corporation.