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Decarbonisation, demographics and deglobalisation: Sustainable Multi-Asset Fund Strategy Evolution

The 3D Reset

CMAF/ SMAF 3D Reset Article

The Sustainable Multi-Asset Fund (SMAF) aims to achieve a return of UK CPI inflation plus 4% over a rolling ten-year period. For investors who select distribution units, the aim is to maintain the real capital value over the long term while producing a stable and sustainable total return distribution of 4% per annum. This approach is designed to balance the needs of both current and future beneficiaries.

The Fund was launched in 2018 and, since then, the investment strategy has continued to evolve, adjusting to shifts in the economic and market environment. We recognise that the global economy is now in a phase of considerable transformation. This was initially precipitated by the pandemic closely followed by the war in Ukraine, but in reality, these tragic events served to crystallise changes that have been building for some time.

As we navigate through these significant shifts, we have identified three key trends - deglobalisation, decarbonisation, and demographics, collectively referred to as the "3D Reset". These trends are shaping the global economy and influencing our investment strategy. In the following sections, we explore what the 3D Reset entails, its investment implications, and how we are evolving our strategy to ensure the Fund continues to deliver on its objectives.

What is the 3D Reset

The “3D Reset” refers to the three “Ds” of deglobalisation, decarbonisation and demographics. We believe these ongoing trends have had and will continue to have significant long-term implications for investors.

Understanding the 3Ds—how they affect the global economy and what that means for markets might be the key to deciphering what comes next and where the opportunities are.

What are the 3Ds?

Demographics: Changing demographics – specifically a predicted slowing of global population growth – will have a huge impact as employers face pressure to compete for a tighter talent pool and maximise the efficiency of its existing workforce. Companies will also look to invest in productivity-boosting technology to protect profit margins, like hastening the more widespread adoption of robotics and artificial intelligence.

Deglobalisation: The Covid-19 pandemic and rising geopolitical tensions have heralded a new era where greater supply chain resilience and security is a priority. These winds have and will encourage greater nearshoring of key sectors, such as manufacturing, which in turn will have implications across a wide range of sectors and asset classes.

Decarbonisation: Recent geopolitical tensions have accelerated the need for countries to reduce their dependence on traditional energy sources such as fossil fuels; in turn, this has strengthened appetites for action on the energy transition. An estimated $100 trillion will need to be spent across the energy industry by 2050 to reduce carbon emissions to the levels that would achieve the net zero goal.

What are the implications?


In the near term, central banks have probably already done enough to lower inflation from the peaks in late 2022, when UK inflation hit a 40-year high. But even once the immediate problem is addressed, inflation pressures are set to persist in the new economic regime.

First, on the demographic front, ongoing worker shortages could push labour costs higher. Since the pandemic began, the labour force participation rate has fallen both in the United Kingdom and in other economies, such as the United States. In December 2022, there were 11 million unfilled job vacancies in the U.S., with only 5.7 million unemployed people. Basic economics dictates that where demand exceeds supply, prices, or in this case wages, must rise.

Next, deglobalisation is adding to long-term inflationary pressures. The pandemic further intensified the already strained relationship between the West and China as widespread blockages in the Chinese supply chain exacerbated inflation and highlighted the over-reliance on imports. The Russia-Ukraine conflict exposed similar dependencies, particularly regarding energy and agriculture in Europe.

In response to the disruption, we are seeing a new world order develop. Companies are diversifying their production and relocating it nearer to home in a process known as “reshoring.”

This means one of the great deflationary forces of recent decades, the growth of low-cost production in China, may have run its course. Globalisation can still play a role in lowering costs as production moves to new countries, but the easy gains—the globalisation dividend—could be over as firms place increasing importance on security of supply.

The third D of decarbonisation is also likely to have a significant inflationary impact. Although the cost of producing renewable energy is falling sharply, the cost of replacing carbon-based energy along with more aggressive carbon taxation policies, which will be needed if governments are to mitigate carbon emissions to meet policy commitments, will raise energy inflation for many years to come.

Together, it is therefore likely that these “3Ds” will result in higher and more volatile inflation.

Consequently, we have revised our assumption for long-term UK inflation upwards, from 2% to 2.4%.

We still expect to generate returns ahead of inflation over the long term. However, as we move into this new economic regime, we are evolving the strategic asset allocation of the fund to ensure we can continue to target Inflation +4% within the same risk profile whilst taking advantage of the trends.

To counterbalance the effects of higher inflation, we are modestly increasing the neutral equity allocation to 75% from the 1st April 2024. The funding for this adjustment would be sourced from alternatives and commercial property.

CMAF 3D Reset Table

Source: Cazenove Capital, 2024

This evolution underscores our commitment to delivering the best possible outcomes for our clients by continually adapting our strategies to the evolving investment landscape.

If you have any questions please get in touch with your Cazenove contact.

Disclaimers, risk warnings, company particulars and regulatory status


We comply with our obligations under the Financial Services and Markets Act 2000. The disclaimers set out in this section do not exclude or restrict liability for any duty to clients under this Act or any other applicable regulatory authority. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. The material in this document is for information purposes only and the services, securities, investments and funds described may not be available to or suitable for you. Not all strategies are appropriate at all times.

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Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.