Charity Investment Forum 2014 - In Tune
The 2014 Cazenove Charity Investment Forum took place at the Guildhall School of Music and Drama. The theme for the day was ‘In Tune’ and centred on the School’s music although Richard Stilgoe added drama with his brilliant contribution at the end.
Giles Neville, Head of Charities, opened the event, highlighting the successful integration of Schroders and Cazenove Charity teams since the move to 12 Moorgate in late 2013. As the largest investment management business in the charity sector, Cazenove Charities takes its responsibility in the sector very seriously, partnering and collaborating with sector bodies to publish research on relevant topics such as sustainable rates of expenditure for charities and responsible investment, about which there was a session later in the morning.
Given recent events in global economics, Richard Jeffrey, the Chief Investment Officer of Cazenove Capital Management, was introduced under the banner of ‘Percussion’. Richard described his ‘wall of worry’ and listed his concerns, ranging from the Russia/Ukraine and Middle East crises, to low productivity and faltering growth, and falling gold and oil prices.
He discussed how global growth had averaged 3% before the financial crisis and, between the years of 1994 and 2008, unemployment had never increased annually. Since the crisis however, global growth is more likely to be in the region of 2.5% per annum and this will make any dips in activity far more significant.
Richard expects interest rates to start rising in the UK and US in 2015 as Germany and France are still lagging and with Italy in recession, the ECB will have to take further action. Japan is now up to “three lost decades” and despite Mr Abe’s best efforts, Richard believes the economy will continue to struggle. Similarly risks remain to the downside in both China and emerging countries, given their links to global growth and the transition of China to more domestically led growth.
Dominic Liversedge, a global equity manager at Cazenove Capital Management was confident that, despite the MSCI World Index being at an all-time high, long term investment opportunities remained in equities. Particularly when compared to global bonds, where half currently yield less than 1%. Even in economies such as the US, which appear to be more expensive than others, there are still cash–generating companies with high dividends, that offer the potential for enhanced returns.
Changing the focus from markets and economies to charities, Fiona Hathorn described the work and aims of Fight For Sight where she is a trustee and member of their finance committee, particularly in relation to the oversight and monitoring of their investments. Fiona debated the decision to award the mandate to one manager over three and highlighted monitoring issues such as risk and volatility, benchmarking options, the role of consultants and the difficulties involved with screening for ethical criteria.
After the break, we focused on Responsible Investment. Kate Rogers, Head of Policy at Cazenove Charities, and Richard Jenkins, Policy Advisor at the Association of Charitable Foundations (ACF), are currently researching a paper due to be published in Spring. They shared their initial findings, including results of the largest survey of its kind, examining responsible investment practices of charities. Richard concluded by suggesting charities start with the ambition to best achieve their mission and bear that in mind when designing any responsible investment policies.
Jessica Ground, Global Head of Stewardship at Schroders followed this session by discussing how good stewardship is integrated within our investment process. She described how the consideration of Environmental, Social and Governance (ESG) factors as part of an investment decision has become more commonplace over the past twenty years. There is more academic and practical research to prove that these factors can have a meaningful impact on both the sustainability and financial returns of companies. Disasters such as the BP oil spill in the Gulf of Mexico have shown how failures in governance can create significant loss of value. We believe that engagement with companies rather than confrontation or divestment is the best way to drive change and improve returns and a long-term approach to ESG is required, integrated within the investment process.
The Forum ended with all 290 delegates and the Cazenove team taking part in a song organised and conducted by Sir Richard Stilgoe. Sir Richard opened his talk with tales and examples of his work on musicals Starlight Express and Aspects of Love. He then went on to explain how, with proceeds of shows staged in the US, he had started a charity, the Alchemy Foundation.
Subsequently he launched the Orpheus Centre in 1998, which is a specialist college for young people with disabilities. The school provides supported housing and a diverse curriculum of performing arts, independence, functional and life skills to over 40 disabled young adults every year.
Having gathered some words from the audience thirty minutes earlier, Sir Richard sang to us a piece composed for the occasion, the lyrics of which contained words including ‘Total Return’, ‘Quantitative Easing’, ‘Dead cat bounce’. Impressively, he tied in the themes of the morning, with some typically witty rhyming couplets.
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