- Yet less than half of all families (49%) actually have an explicit, agreed set of values
- The number of families applying exclusions to their investment strategy doubled to 43% since 2018
- Listed equities, private equity and real estate remain the most favoured asset classes with little appetite for radical engineering of portfolios over the coming five years
Stonehage Fleming (“Stonehage Fleming” or “the Group”), one of the world’s leading international family offices, reveals that over two thirds (71%) of affluent families incorporate non-financial values in the management of their family wealth.
This finding is contained in Stonehage Fleming’s report, ‘Four Pillars of Capital 2023: Managing Risk in an Age of Upheaval’, which is based on proprietary research conducted with nearly 300 members of different families, wealth creators and their advisers (see ‘Methodology’).
While 16% of respondents orient their investment strategy using financial returns alone, those who deliberately invest their entire portfolio to reflect their non-financial values has nearly tripled to 13%, from 5% in the 2018 Four Pillars of Capital report.
The manner in which these non-financial values are incorporated, however, remains relatively unstructured for the majority of respondents. One reason for this disconnect may be that many families have not explicitly decided which non-financial values they wish to target, with under half (49%) having an agreed, explicit set of values.
The survey identifies a significant increase in the proportion of families who choose strategies involving a more active approach to stock-picking or investor manager engagement. The proportion of respondents invested in explicitly ESG or Socially Responsible Investment (SRI) products has more than tripled to 45% (2018: 14%), and those adopting an impact investing approach has nearly tripled to 22% (2018: 8%). At the same time, excluding investments deemed unsuitable from families’ portfolios via negative screening has become more popular, nearly doubling to 43% (2018: 24%).
The survey also reveals families’ views on high-level asset allocation remain substantially unchanged since 2018. Listed equities, private equity and real estate remain the favoured assets classes, with little appetite for radical engineering of portfolios over the coming five years.
Graham Wainer, CEO Investment Management at Stonehage Fleming, said: “Despite the economic landscape undergoing a series of tectonic shifts we are encouraged that the 2023 survey finds 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. We have long emphasised the importance of viewing investment returns over a cycle and despite the challenge in a period of higher inflation, we believe that targeting capital growth in real terms is the correct strategy for investors new to investment markets as well as those with multi-generational characteristics.”
Mona Shah, Head of Sustainable Investments at Stonehage Fleming said: “Over the last decade there has been nothing short of a revolution in the integration of values beyond financial return alone into the design and implementation of investment strategies. We have seen two important trends emerging over the past decade. Firstly, an increased desire amongst families to define their non-financial values explicitly and to integrate them not only into the management of their wealth, but into their businesses, philanthropic activities, and general conduct, and secondly, an increased commoditisation of sustainable investment offerings from the investment management industry.”
Commenting on bridging the gap between families’ ambitions to increase their values-based investing and the often commoditised offerings available Mona added: “Experience suggests a simple three-step framework. Define and agree your family’s non-financial values, choose how to incorporate these into your wealth management strategy, and ensure that impact is measured, and the outcomes are monitored.”
