Cazenove Capital outlines key themes emanating from clients and the firm’s positioning to address them
London, 26 January 2022
Mary-Anne Daly, Chief Executive of Cazenove Capital, last week provided an update on the key matters that are on clients’ minds and how the business is addressing those priorities. Global Chief Investment Officer, Caspar Rock, set out Cazenove Capital’s market outlook for the year ahead and the positioning of client portfolios with this in mind.
While the ability for portfolios to withstand external shocks and to continue to grow in real terms in the face of higher inflation remains an important client priority, Cazenove Capital’s most recent client survey* points to the equal importance of factors internal to each family such as their ability to bring up a healthy, enlightened next generation; for the family assets not to be squandered and for the family purpose to live on.
Cazenove Capital also observed a significant shift in social conscience, accentuated by the Covid-19 pandemic, with an increased interest in philanthropy and 64% of clients ranking ESG factors as more or equally important to them as financial returns.
Strategic priorities to meet client needs
Looking to the year ahead, continuing to attract, retain and train top, diverse talent remains a key priority. Mary-Anne Daly pointed to the quality of the team and specifically of its deep pool of next-generation advisers who are critical to building long-term, stable relationships of trust with multi-generational families. Additionally, she highlighted three strategic priorities as follows:
• Continue to enhance the client proposition with a particular focus on sustainability and private assets. For example, now providing all UK clients with data-points on the impact of their portfolios on People and Planet as part of regular valuations
• Expand Cazenove Capital’s strong franchise with UK business owners throughout the UK, continuing the regional expansion seen in 2021 when the firm opened a local presence in each Manchester, Birmingham and Bristol adding to its existing regional offices in Edinburgh, Oxford and Chester
• Continue to grow Cazenove Capital’s strong franchise in the UHNW and Family Office segment, with the Sandaire 2020 acquisition forming part of that strategy.
Mary-Anne Daly, CEO of Cazenove Capital, said: “It is evident that sustainable investment is becoming very important to clients. Over the last two years, we have seen a significant shift in social conscience, with clients seeking advanced sustainable and philanthropic solutions with proven impact. Clients are also seeking innovative ways to access private assets investments as a portfolio diversifier.
“Our business is focused on our clients and our people. As a largely family-owned business with a 200 year history and the backing of a Global FTSE 100 Asset Manager, we are uniquely placed to provide clients with the stability and personalised service they seek, alongside best-in-class investment, wealth planning and lending expertise.”
Key investment themes
Reflecting on the investment outlook for 2022, Cazenove Capital identifies four longer-term themes presenting investment opportunities for HNW and UHNW clients in the year ahead:
• The continued adoption of technology and changing consumption patterns
• The rising importance of China
• Green initiatives benefitting from fiscal expansion and policy measures
• A secular shift toward private markets
Cazenove Capital predicts continued, but slower growth in 2022 as government spending is likely to fall, with consumers and companies still holding cash to invest in improved productivity. Strong consumer demand and supply bottlenecks could keep prices rising early in the year, but UK inflation is expected to fall from a peak of around 5.5% in April.
Caspar Rock, Chief Investment Officer at Cazenove Capital, said: “Stronger-than-average economic growth and rising earnings should continue to support shares, but growth rates will be slower than in 2021.
“While valuations are at historically high levels, equities still look better value than bonds and we believe they are more likely to generate positive real (inflation adjusted) returns. Higher quality companies look attractive in a more inflationary environment. The environment for government bonds could be more challenging with nominal and real yields moving higher from exceptionally low levels as interest rates start to rise.
“Alternative assets can help better protect portfolios against inflation and market drawdowns in the current environment. Defensive assets such as gold and absolute return funds can help mitigate the risk of a market correction, whilst commodities can hedge against sharp rises in inflation. Risks to the outlook remain due to the impact of Covid-19, geopolitical tensions and a worse-than-expected slowdown in China.”
Cazenove Capital is seeing increasing interest from clients in private markets, which have continued to grow in size and relevance. Today 88% of family offices and foundations have an allocation to private equity of more than 10%, with over 60%¹ planning to increase their allocations over the next year. Private equity saw strong returns in 2021 with IPOs dominating exit markets and rewarding investors with high valuations.
Luca Serino, Private Assets Investment Director at Cazenove Capital said: “It is important to adopt a systematic approach to committing capital over a number of years when investing in private markets to mitigate vintage-year risk, particularly after a period of such strong returns. As ever, manager selection remains a decisive factor. To ensure that clients have diversified private asset portfolios, we invest in a broad range of assets classes including Private Equity, Private Debt, Real Estate and Infrastructure.”
Cazenove Capital has more than doubled assets under management following sustainable investment strategies since 2018². The Responsible Multi-Assets Fund, Cazenove Capital’s Sustainable Charity Fund launched in 2018, saw its assets grow 228% last year, from £245m to £805m².
Two key sustainable themes where Cazenove Capital sees opportunities for clients in 2022 are:
• A social theme: sustainable healthcare: Global government healthcare expenditure is steadily increasing, costs for individuals are rising despite governments footing more of the bill, and nearly 75% of healthcare costs are spent on patient care3. Cazenove Capital believes that in order for a healthcare system to be sustainable, all stakeholder needs must be addressed.
• An environmental theme: sustainable infrastructure: A change in infrastructure spending is required to achieve a 2C scenario4 and clients can play a key role in providing capital. For example, CO2 intensity of the cement production required to allow for more infrastructure to be built must decline by 3% per annum to achieve net zero by 20505. Cazenove Capital believes renewables will significantly increase their market share across all scenarios by 2050, against this backdrop.
Catherine Hampton, Sustainable Investment Lead at Cazenove Capital, said: “The COP26 conference has created a greater desire for clients to invest to make a difference. Themes dominating our conversations with them include investing to support Net Zero targets, a Just Transition and Biodiversity outcomes.
“We will be closely monitoring development around each of these themes to identify attractive investment opportunities and will continue to engage with companies to influence change for the better.”
Click here to watch the full 2022 outlook from Cazenove Capital.
¹ Source: Montana Capital Partners, December 2021
²Source: Cazenove Capital
3HSBC and OECD Health Data, 2019.
4Battacharya et al., 2016, Global Commission on the Economy and Climate, 2014
For further information, please contact:
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Note to Editors
* The data in this report was drawn from a survey of 70 respondents. These were family members or representatives of families where invested assets were valued at GBP10 million or more. The survey was conducted between November 2019 and October 2020.
Respondents’ ages varied, with 35% falling into the age group 51 to 65. Over-65s made up 17% of the respondent base. Respondents aged 30 or under were limited to 26.
Three quarters of respondents were male. Half of the female respondents were aged 30 or under.
Where respondents were asked to rank responses out of a longer list, we applied a process of weighting to reflect higher or lower priorities. This produced an overall score taking all responses – and their ranking – into account.
[601803 – July 2021]