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The Stonehage Fleming View: Investment

Our investment offerings are underpinned by the conviction that responsibly managed businesses, evidencing strong ESG credentials, are likely to be valued more highly by investors. The launch of our Global Sustainable Investment Portfolio, inspired by the findings of the 2018 Four Pillars of Capital report, provided the platform to help educate clients and staff on the importance of responsible investment, the benefits to the wider community, and crucially the idea that positive impact and competitive investment returns need not be mutually exclusive. For clients, this helps them become even better stewards of their family capital.

Notwithstanding this increasing preference to put responsible investment criteria at the heart of their investment strategy, there remain a number of obstacles to transitioning clients’ portfolios, including taxation, limited liquidity of investments in private companies and transaction costs. Meaningful progress can, however, be achieved by ensuring we incorporate best practices of stewardship in all our main client investment strategies, whether investing in publicly quoted businesses of high quality or selecting third party managers whose values and approach to proactive engagement with companies reflect our own. This progress is evident in that 95% of the third party managers we hold for clients now are signatories to the UNPRI, as opposed to less than 50% in 2018.

More broadly, we are encouraged that the 2023 survey finds that there are no sizeable swings in preferred asset classes. We certainly see the benefits for investors of patient capital in holding less liquid positions in private market investments to complement exposure to mainstream public markets. It may be no coincidence that in 2023 our most recent annual private capital programme attracted the highest level of support we have seen in more than half a decade. We have also long
emphasised the importance of viewing investment returns over a cycle; this is acutely relevant in an environment where evaluating performance on a CPI+ basis has been disappointing in the recent past. Despite the challenge in a period of higher inflation, we believe that targeting real capital growth is the correct strategy for investors new to investment markets as well as those with multigenerational characteristics.

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