Client Update - 14th August 2020
In the words of American politician Rahm Emanuel (who used the quotation himself), a crisis is “an opportunity to do things you think you could not do before.” Change can be enacted to either alter course or accelerate an existing path. I thought it would be a nice change of pace this week to reflect not just on how the COVID-19 world has been embraced by some of our key funds, but also by our firm, as your financial advisers. We continue to build what we see as a sustainable investment framework, while also focussing on how we, as a business, can improve our client service over time.
A sustainable business requires constant innovation to respond to changes in market fundamentals, the environment and society. This is imperative for business longevity and for the benefit of our clients. Innovation is often looked at in a relatively narrow sense, being naturally associated with technology and spending on research and development. While this is important, we have taken a broader view of innovation, which we believe encapsulates changes in strategy, process and product. In times of change, businesses need to evolve when faced with a new challenge and this has certainly been the case with regards to COVID-19.
In March we were faced with a relatively sudden reality that not only were we, as a firm, going to be working remotely, we would also likely be doing this for some time. We took the decision to move the entire busines, save one member of staff, to remote working before it became mandatory, to allow us to test out IT systems and look for any shortcomings with our process whilst we were fully staffed. This also allowed us full access to third party IT support whilst they were still office based in case we did run into any problems. This process worked well, and we have not really experienced any issues since that point in early March.
A cultural change has also been important, and we have moved our internal company update meetings from once a month, to weekly via the delights of Zoom online video conferences. We have adapted our client reporting, bringing in a weekly email update service to all clients, trying to talk generally around the impact of COVID-19, but also about the progress we as a firm are making and also that of our client portfolios. It became clear to us that in the current environment the Discretionary Fund Management Service that Chetwood Investment Management offers, gave clients for whom it was suitable, a real edge in being able to adapt to the sudden switch to “stay at home” investments. The ‘lockdown winners’ narrative from the COVID-19 crisis is well-versed – from those aiding working from home, to e-commerce and addictive TV content streaming providers. This progress has been no secret and the share prices now reflect this.
Within our portfolios, whilst we have played the “stay at home” theme, we also have several less obvious examples of funds and their underlying companies that have subtly heeded the same advice and are emerging leaner and stronger for the future ahead. They are either making changes to the business or using the crisis to their advantage to take market share. And the beauty is that although these actions have made the businesses more valuable, the stock market is yet to cotton on, so the benefits are mostly ahead of us. These are funds we aim to build our portfolios around in the years ahead. We have also created mainstream Environmental, Social and Governance portfolios (ESG) that focus in on the sustainable business theme, but also on helping to benefit the environment, improve social outcomes and improve corporate governance to diversify boards, incentivise employees and benefit the shareholders over the longer term. We feel the investment world is moving quickly in this direction and some of our key ESG funds now also feature in both our standard model portfolios and our bespoke client offerings.
As we digest the ongoing economic news flow it seems probable that the economic data has bottomed for now, but the economic recovery remains uncertain both in terms of time and strength. Governments are still working out the equilibrium between reopening economies and managing the spread of the COVID-19. This is in effect a real-time experiment being played out around the world. Unfortunately, in places where the virus was never fully under control, notably the US and to a lesser extent the UK, this will mean keeping more constraints on economic activity than previously hoped, not least given the continued intention to resume schooling in the Autumn. Even in places such as many parts of continental Europe, Asia and Australia, governments are having to reintroduce or tighten policies to manage the spread of the virus, which may have been suppressed to very low levels but remains extremely difficult to eradicate without travel and border restrictions and very effective testing and tracing infrastructure.
We feel we have the infrastructure, team and processes in pace to work successfully through the coming weeks and months, whatever the markets throw at us. We will continue to make improvements along the way, and if there is anything else that you feel we are not currently offering, please do let us know. Feedback is crucial in continuing to enhance our client services. We are very grateful and humbled by the unerring support of our clients. For now, take care, try and stay cool and watch out for those thunderstorms.