Progress - Charity Investment Forum 2016

Cazenove Capital’s Chief Economist, Richard Jeffrey, presented his thoughts on the economy. Global growth is undoubtedly slower than in the years prior to the financial crisis. The unexpected referendum result has provided a backdrop of heightened uncertainty. However, a closer look at consumer expenditure reveals little change over the past few months or from this time last year, despite recent events. Richard believes that investing in digital infrastructure will be the best way to stimulate productivity and attract foreign direct investment in a post-Brexit world and is optimistic that the UK’s entrepreneurial youth will rise to the challenge.

The global economic implications of Trump’s presidency will depend on his policies, which are yet to be clarified. Significant infrastructure expenditure will likely be inflationary. Protectionist policies may be helpful for the US in the short term, but will hinder global trade and be unfavourable for emerging markets in particular. Despite being uncertain on the economic effects of the president-elect, his success will certainly inspire other populist political movements. This is particularly an issue for Europe, with several important elections over the next 12 months.

Harnessing big data

Alex Tedder, Global Head of Equities at Schroders, and Ben Wicks, Portfolio Manager on the Schroders’ Global Equity team talked about incorporating data insights into the equity investment process. As an example, we can collect and efficiently process large samples of consumer spending data allowing us to see exactly how much someone, matching a specific demographic, spends in which shops each week. Combining this with how the habits of thousands of others have changed since the referendum has to be more informative than waiting for each individual retailer to publish its quarterly results.

We believe that collecting and handling large ‘datasets’ gives us an information edge in an age where more information is available, although appropriate interpretation and use of judgement remains essential.

Property sector innovation

Technological progress and a new generation of workers are also having an effect on the commercial property sector. James Thornton, Fund Director of Mayfair Capital’s Property Income Trust for Charities, reiterated that technology is changing the properties most sought after by occupiers. Amazon Prime membership increased 51% globally in 2015. With speed and method of delivery a key battleground amongst retailers, urban logistics is becoming more important at the expense of the traditional high street.

Whilst the high street is in decline, with 1,700 banking units closing as a result of the rapid rise in online banking services, there are other opportunities. Younger generations are eating out much more frequently than their parents. 60% of people aged 18-24 eat out at least once a week, resulting in rising rents for urban restaurant space as a result of enhanced occupier demand. Mayfair Capital is positioning their portfolio for the future, capitalising on structural progress on behalf of their charity investors.

Progression in the charity sector

Despite a strong year for charity investment portfolios, it has been tough for the sector more generally, with unfavourable media attention affecting public trust and fewer resources to champion the sector. In a panel session chaired by Kate Rogers, Head of Policy at Cazenove Charities, the challenges and opportunities for the charity sector were discussed.

Karl Wilding, Director of Public Policy and Volunteering at NCVO, highlighted that digital progress has made it easy for anyone to look at a charity’s accounts and the media have not been afraid to shame those who do not appear to be conducting themselves properly. We should harness this technology to tell our positive stories to enhance the public’s trust.

Katie Blacklock, Power to Change, brought a trustee perspective to the panel. With the spotlight on investment managers to generate high returns and absorb some of the pressure on charity finances, the biggest challenge now is how to define and articulate the charity’s success in social terms.

David Renton, Finance and Development Director at Guy’s and St Thomas’ Charity, agreed that measuring impact is one of the most difficult areas for charities. To progress, he said, charities need to think like profit-making businesses, to invest in people and infrastructure and then ensure they are getting value for money. Charities should not shy away from scrutiny, but instead rise to the challenge.

After some discussion, the panel concluded that charities are undoubtedly facing significant pressures. However, this should be seized as an opportunity to reflect on practices and leverage and enhance the excellent work that is already being done.

A focus on collaboration and transparency will boost the sector’s reputation and help charities progress in a demanding climate.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Registered Office at 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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James Brennan

James Brennan

Portfolio Director