Asset managers, wealth advisers and private investors have all been lured by the concept of 'model portfolios'. Constructed using past performance data, model portfolios are often used as blueprints to determine a portfolio's 'ideal' asset allocation to achieve a desired risk/return profile. In theory, and in the spirit of diversification, this sounds like a fine idea, but come the credit crunch, and a freaky market where all the asset classes move as one, and the disclaimer "past performance is not an indication of future performance" takes on new meaning.
In the case of Newton, however, quantitative, model-building has never been the driving force behind the asset manager's investment decisions. Instead, fund managers such as Iain Stewart, manager of the Newton Real Return Fund, employ a thematic approach to investing, using different themes to define the portfolio structure.
"I don't believe in using the last 20 years or so of data to construct a model of what asset allocation should look like," says Mr Stewart. "The next 20 years are not going to look anything like the last, it is a different kind of world all together."