Investments advised in strong global economy despite Brexit and Trump

Stay invested, stay patient and think long-term are words of advice for family business leaders from Coutts at the launch of its outlook for 2017.

The 325-year-old London-based private bank and wealth manager identified sterling, short-dated credit, financial debt, European equities, global healthcare, US technology and a “responsible approach” to investing as the key opportunities for growth in its Investment Outlook: Timeless Principles in a Changing World.

Asked by CampdenFB what advice the firm would offer family business leaders for the 12-months ahead, Camilla Stowell (left), Head of Coutts International and Coutts Private Office, said investment advice depended on what the purpose of the wealth was.

“Then from supporting them to build investment solutions we're really there to provide the longer-term outlook, whether that's our familiarity with working with various structures… or approaches, it's stay invested, stay patient, think long-term.”

Stowell said investing was an emotional decision so Coutts worked extensively with families to educate generations and stakeholders to make sure everybody had a clear understanding and could make confident decisions.

“Our role is to take the emotion out of investing as well and give them our long-term thinking and take the responsibility of managing the funds for them,” she said.

Peter Flavel (right), chief executive of private banking, said the nature of its client base meant Coutts spent a lot of time ensuring “wealth has its intended consequences so the funds that we manage are intergenerational funds and clients think very differently about investing when they're thinking about their grandchildren's grandchildren than when they're still in the accumulation phase.”

Stowell said Coutts also worked with family offices around private investments.

“We have the Investment Opportunity Service where we team up with interesting ideas which actually come through a lot of our existing clients. These well connected, highly successful people bring ideas to us. We have a highly skilled team that then do the due diligence, have a look at the quality of the ideas, are they in-keeping with our core themes, and we bring them into a professional status and give them access to those ideas.”

Flavel added that “connecting the most influential and successful families together with other families that they haven't come across in business is a big part of what we do.”

Coutts announced today it oversaw an increase in the assets under its management (AUM) in 2016 in addition to strong investment performance. AUM in the first three quarters of 2016 grew by £1.3 billion ($1.6 billion) to £16.6 billion ($20.5 billion), which incorporated AUM by Adam & Company.

Investment performance remained strong throughout with the firm's globally oriented Tailored Portfolio Service achieving first quartile compared to peers over one and three years across all strategies, up to end December 2016.

While sterling fell by about 15% in the four months after the UK voted to leave the European Union, Coutts expected to see the exchange rate moving back towards its longer-term average. Its investment team will look to take profit on some overseas investments and re-invest the proceeds in sterling-denominated assets, while still maintaining a diversified portfolio, in-line with its long held investment principles.

Mohammad Syed (above), Managing Director and Head of Financial Advice & Investment Solutions at Coutts, said “dark clouds” had formed over sterling since the UK voted to leave the EU.

“However, our investment principles of long-term thinking and a willingness to focus on quality assets at a sensible price to find good value, lead us to view sterling in a different light. Concerns over the UK's current account deficit are, in our view, overplayed and the deficit should begin falling soon. We only have to look at the market's love of the dollar and remember that the US has run a trade deficit every year since 1975, to support our optimism for sterling.”

Alan Higgins (right), chief investment officer at Coutts, said at the press conference today a “quiet economic boom” was happening in the world despite Brexit and Donald Trump's election as US president. Purchasing managing indices in services and manufacturing were “surging” worldwide.

“If you look in terms of the major economies, there is only one country below 50 indicating soft to negative growth, which is Brazil,” Higgins said.

“Everywhere else is above 50 and in the UK substantially above 50.”

Higgins said retail sales were growing at just under 7% year-on-year in the UK.

“Quite incredible, it should normally be associated with 4% or 5% interest rates, and we're not going to get there. That close to 7% consumption is helping to lift some sticky boats.”

Higgins said the substance of Trump's brand of economics was basically UK and Irish policy, namely big reductions in corporation tax.

“There was an awful lot of fear on tariffs whilst forgetting that tariffs are just business-as-usual in the US. Even Obama put some tariffs last year on Chinese rolled steel and, of course, one of the most active proponents of tariffs was Reagan.”