We do not invest directly in Apple. As a stock it’s basically the opposite of a value play in that it got very high price to earnings and price to cash flows ratios. Its price soared over the last couple of years because obviously during the pandemic, people have been buying lots of tech. So, it’s now very overvalued. Our only exposure to Apple is a small amount of indirect exposure because it’s a member of the S&P 500. Our S&P 500 exposure is currently a lot lower than its historic average because we balanced it out with an index called the Russell 1000 value index which has no exposure to Apple or only miniscule amounts. Pfizer was actually in the global equity funds. Until I think it was in November last year when the vaccines were announced and Pfizer share price shot up, as you’d expect. But then management were doing something dodgy I think the CEO sold a large quantity of shares just when the price was spiking. So, we did sell the stock from the Global Fund, although again we still have minimal exposure to it through the S&P 500 index and if it becomes a value stock, again, we may look at it of course we’d be mindful of management and governance issues as well.

We actually do invest in a tobacco company in the Global Equity Fund at the moment, it’s called Scandinavian Tobacco Group, but a large amount of its revenues come from vaping and cigars rather than cigarettes.

ESG (Ethical, Social and Governance) checks would have been done on that stock and it’s been chosen because it’s got excellent value characteristics.

When the pandemic came upon us in March 2020 we looked for data to help with our decision making.

We looked at the Spanish flu pandemic of 1918 in particular and this gave us some idea of what happens in pandemics at least in relatively recent times.

One or two friends who are medical doctors gave me some interesting pointers and useful information, alerting me to an online talk by Professor John Bell, a very senior epidemiologist

As one of my medical doctor friends explained, what is consistent with pandemics is that viruses don’t kill you deliberately, what they want to do is survive. They survive if we survive so the longer they can keep the host alive the better for the virus.

The smart virus as it evolves will tend to become more transmittable and less deadly, so Omicron is in many ways what you would expect.

If you look at the data from South Africa, the level of infections shot up very quickly and then it started dropping increasingly quickly. If there is a high level of infection – between one in ten and one in 20 of the population –  as was previously the case in London, then hopefully  a lot of people will pick up antibodies and build immunity,  then this could be the blowout and might suggest we are approaching the back end of this.

So, subject to nothing else happening that disrupts the economy, I think we are going to see an end to it in 2022, so our and outlook is quite positive.

However, you have to be careful as despite the pandemic, we made good money for our client in 2020 and 2021.  How well the markets do probably will probably have nothing to do with the way that Omicron comes to an end.

The value of money is always being debased through inflation, but the alternative – deflation – has a more detrimental effect on the economy as it discourages investment and spending (why spend now when what you want to buy will be cheaper in the future?). The real test of government borrowing is whether it’s productive. If it is, and the economy grows, then servicing the debt is generally quite easy. Where severe problems occur is when governments tax and spend recklessly, disincentivising investment by business and families. Currently, there is a lack of investment in the UK and a big build-up of savings, so government policy designed to increase spending is good for demand and should result in some good old-fashioned Keynesian growth.

We have grown quite steadily actually. I don’t think you can say Courtiers growth has been meteoric. It has certainly been strong over the last 15 years. It’s a bit like our approach to stock selection. You find good businesses, you acquire them, you make sure you have good people and things go on.

There is a phrase that myself and Jamie Shepperd, who does the lion’s share of the work on acquisitions use and that is ‘No Trojan Horses’. A company that looks lovely and attractive on the outside, you acquire but as things unfold it just rots you from the inside. So, we say ‘no’ much more than we say ‘yes’, and Jamie is very patient on his acquisitions. We have bought some great companies with some great people and they continue to make a valuable contribution to Courtiers future. So, I would say, ‘more of the same’ because it has worked extremely well.

In his classic 1776 work, The Wealth of Nations, Adam Smith said that mutual fear alone could inspire independent countries to treat each other with respect (at the time he cited us Europeans as being the main perpetrators of injustice towards weaker nations). Nearly 200 years later he was proved right as the fear of nuclear retaliation deterred stronger countries from acting against those with less military might. In fact, the world is more peaceful than it has ever been and ironically that is probably because we live in an age where MAD (mutually assured destruction) is a real deterrent. Russia and America have squared up to each other before – the Cuban Missile Crisis probably being the most famous incident – and they worked out their differences.  It’s not in Putin’s or Biden’s interests to start WW3.

The simple answer to this question is that I just do not know. I am a bit compromised in giving an opinion because I strongly believe in the benefit of cooperative academic research, but I also believe that many breakthroughs happen despite, not because of organised bureaucracies, scientific or otherwise. Only time will tell on this one I’m afraid.

Short term, Brexit will create lots of problems between us and our EU trading partners and that is likely to reduce our rate of economic growth. Long term, the effects will depend on the openness of the British economy. Patrick Minford, the leading Brexit economist  and one of the architects of Thatcherism (but bear in mind Margaret Thatcher was pro-EU) advocates the benefit of free trade and has consistently pointed out that the EU is a free market to only those that are members of it – to others it’s a trading cartel with stringent tariffs for non-members. Minford argues that the British economy, outside of the EU, can adopt a freer trade policy and flourish as a result.

Personally, I voted to remain, but it was marginal and back in 2016 I believed that our exit from Europe could only be negotiated by a government voted-in with that specific mandate and that as Cameron had won the 2015 election on a pro-EU ticket his government would be compromised if the referendum went against him. That proved right and it was only after Boris was elected by the British voter on a mandate of “Get Brexit Done”, that we actually got it done!

In the end, I suspect the UK has made the right decision because EU fiscal rules create enormous strains for countries outside of the North/Central European block (mainly Germany and the Benelux countries), especially for those that have adopted the Euro as their currency, and this may be to the detriment of future EU growth i.e. the EU may be holding back its members. In a recent report the CEBR (Centre for Economics and Business Research) forecast quite robust growth for the UK (and much better than compared to France) predicting that it will remain the 6th largest economy in the world over the next decade.

Brexit has made trade with the EU more difficult, which in turn has disrupted supply chains and probably contributed to recent inflation spikes and shortages of certain goods, although this is not a phenomenon that is unique to the UK as every economy in the world is suffering right now and that’s down to Covid-19. Perhaps peculiar to the UK is the shortage of labour in sectors that were previously attractive to EU workers e.g. construction and catering.

These were not covered during the seminar as the Courtiers Ethical Portfolios are individually tailored dependant on a client’s risk level. There is not a set weighting per sub-group of clients as the weighting of underlying funds depends on the agreement between adviser and client at outset.

Three out of the four ethical funds have outperformed their Weighted Peer Group Median over 1, 3 and 5 years. We are happy these are maintaining their strong ‘dark-green’ approach to screening and we have no concerns in relation to the underlying funds.

Based on a

• ‘Below Average’ (with 60% in the Ethical Equity Funds and 40% in the Ethical Bond Funds)
• ‘Average’ risk client (with 75% in the Ethical Equity Funds and 25% in the Ethical Bond Funds)
• ‘Above Average’ risk client (with 95% in the Ethical Equity Funds and 10% in the Ethical Bond Funds)

These have outperformed their Weighted Peer Group Median over 1, 3 and 5 years. The volatility of the portfolios has been slightly higher than its Weighted Peer Group Median. These performance figures are as at 30 November 2021.

At present we use external funds for our Courtiers Ethical Strategy. There is a great deal of complex research, engagement and screening which, goes into the running of the chosen underlying ethical funds. We meet annually with the fund managers and are not opposed to amending the strategy if required. However, these funds have worked well for us and our clients.

We started this strategy in 2005 based on client demand for a ‘dark green’ (exclusionary based) ethical portfolio because at the time the demand was not great enough for Courtiers to launch their own ethically mandated fund. As the years have gone by the interest in the ethical portfolio has increased.

With regard to launching a new fund inclusive of screening, this is not something we are opposed to launching provided we can ensure we are acting in the best interest of the clients within the portfolio. Our ethical portfolio is fully ‘dark green’ however, and not all clients are opposed to the same areas. Some clients may not be opposed to investing in alcohol whist others would not find this acceptable. The existing funds within the ethical portfolio use a variety of screening approaches as well as consideration of other factors. This includes area,  such as aligning with UN goals, avoiding oppressive regimes, increased company engagement, as well as positive screening for those companies making changes. In short this is something we would look to explore provided we can ensure it meets our clients’ needs.

I think the main difference between The Marshall Plan and the Chinese Belt & Road initiative is that the former was intended to defend against communism and the latter is intended to spread it.

I think the general answer on that has to be ‘yes’. The government has not done a bad job over the last two years. If you look at where the UK has got a lot of credit, it is on two key points.

The way that we have kept people off the unemployment register with people still getting money so they can conduct some form of life during lockdowns.  That’s really been due to the furlough scheme and the rapid response of the Treasury under Rishi Sunak. And the second area is the vaccine rollout, where the government has been very strong.

If I am going to level any criticism of the government, it is the contradiction between what they want, which is more investment by companies and what they have done in terms of tax policy. If you want companies to invest don’t put up corporation tax from 19% to 25%. What you are saying is “invest your money here but we are going to take the returns away in additional tax”. So, I wasn’t impressed by that, but you have to say that Sunak has hardly put a foot wrong through this pandemic.

Omicron really came into public consciousness on Friday 2th November when markets fell by around three and a half percent. This may sound like a lot, but compared to the fall we saw in February and March 2020, it’s actually not that much. The market response has actually been quite muted in comparison.

The one thing markets don’t like is uncertainty and after the initial hit ago, they’ve been a bit up and down. But we haven’t seen any significant market moves like we saw back in March 2020. It’s almost as though markets are  becoming accustomed to Covid developments. The new variants are not causing as much volatility as they did last year. So, I wouldn’t expect to see anywhere near the levels of high volatility we saw when the virus first broke out two years’ ago.

Markets aren’t completely immune. Covid developments are likely to be here for a while, but we’re gradually becoming less frightened by them.

The main problem with cryptocurrency is that it has no real assets behind it, whereas the more traditional safe havens such as gold are very real. You can assign value to gold and people do. Physical assets will always have value whereas bitcoins and other cryptocurrencies still just don’t have anything sat behind them. So, for now, I don’t see cryptocurrency becoming the big new thing, which some people are saying.  Whether it will still be around in 10 years’ time, I don’t know. It will be interesting to follow. At the moment it’s difficult to accept cryptocurrency as the dominant means of currency, just because it’s very complex.

Not to mention it’s hugely volatile, which is never a good thing for a risk-managed portfolio. Plus, there’s no regulation.

The Sharpe ratio is named after an economist William Sharpe. It’s a measure of risk-adjusted return.  You can think of it as how many units of return you generate given the units of risk that you have taken. So, the higher the Sharpe Ratio the more successful a portfolio has been for its given risk level. If our Sharpe ratio is higher, it means that we may be able to generate a higher return for that same level of risk taken by other funds in the sector. We always strive to maximise our Sharpe Ratios, and I am pleased to say that the Sharpe Ratios on the Courtiers Funds are looking good.

The FCA (Financial Conduct Authority) has acknowledged that the term is a bit lose. We did a review on the sustainable funds in the market in October. There’s a whole host of them, probably now close to 8,000. And if you actually drill down into what those funds are invested in as we did – we went through all the product involvements –  we discovered that some of those funds marketed as sustainable had up to 43% in controversial companies. For us 43% of your fund in animal testing, isn’t that sustainable.

The way technology is moving and innovating if we had a sustainable mandate and said, “Okay, we’re not going to invest in any oil.”, well, you can’t change overnight and those companies need to move forward and adapt. This is being driven by investors and shareholders and in response companies are changing their focus and are moving to renewables. Yes, we could shut those off, but you’re not going to make a difference just by walking away. We didn’t want to close anything off in terms of sustainable, and we didn’t want to be bound by what at the moment is a wishy-washy label that doesn’t really define us as we are.

Hopefully next year the FCA will launch their disclosure guidelines and are looking to find something that aligns with the SFDR l(Sustainable Finance Disclosure Regulation) legislation. As we move forward hopefully the labelling will become clearer and the categories will be more certain, but at the moment, we don’t want to restrict ourselves. And as James (Deputy Fund Manager) will tell you, diversification is key – you can’t just cut out a whole sector.

Jack Bogle, founder of passive fund manager Vanguard says; “You don’t look for the needle in the haystack, you buy the haystack,” I would take that further; we try to buy the haystack with the most needles in it. And then our approach is that we make sure we keep the portfolio and keep the equity exposure exhibiting the factors to make sure that we are getting the most bang for our buck for our returns. Inevitably, the reason we diversify is we do get some situations, where the companies didn’t do what we expected them to do, or we were blindsided by some social change or some dynamic in the market or something they didn’t expect. In the Global Fund this year, there were a couple of companies that has supply side issues and these dragged on our performance. There was a Swedish company producing kitchens that literally could not get the materials to complete its orders and this affected its revenue and profitability. On the UK side, we switched from Stagecoach to Go-Ahead Group to take advantage of the government’s focus on transport infrastructure as part of its levelling up agenda. However, unfortunately an accounting error came to light, and as a result they lost one of their franchises. There have not been many of these stories this year, and overall, it’s been really really positive.

I think you’re already seeing the effects of a changing approach in China on Western markets. China has definitely been a source of certain volatility. Obviously, the way things have panned out in Hong Kong has been a problem. There are growing concerns about Xi Jinping wanting to unify China and therefore will the Chinese make a play for Taiwan? There are also concerns that China could be moving away from free market economics and more to state control, and that the world’s largest economy, as measured by purchasing power parity and not just pure dollars, is going to deviate from the trend that it has been on and this is bound to have some effects.

Not all of those effects are negative. If you believe Marx is right with regard to  capitalism’s problem in not generating sufficient demand in a mature economy, and if you believe Keynes is right about liquidity traps, and if you believe that the developed economies of the world are struggling to generate demand, then spending and controlling government is an answer to that demand deficit. And that, of course, is what China has got.

One of the problems however, is that China’s debt to GDP is now greater than the US’s. So, they’ve almost fired their big guns in terms of debt.  One issue is the government’s stimulation of certain sectors, which the Chinese have been very fond of doing for quite a long time and this is leading to problems, as we have seen with Evergrande a huge property developer that is struggling with massive debts. The Chinese stock market itself has been punished – off by 17% last year, so we have not been in Chinese stocks for very good reason and delighted we weren’t there last year. That’s also helped on our volatility measures because it’s a volatile market to be in. So, I think you’re probably going to see the world almost have a new type of Cold War come about. China is obviously very keen to influence the countries around the South Pacific.

There is always some geopolitical tension between countries and different political blocks and the history of this century tells us that this can change very quickly. And that’s why diversification is important because you genuinely, however hard you work, you will never be certain who the winners and losers are going to be. That’s why when you combine diversification with buying stocks with a margin of safety, which gives you a bit of bombproofing, which Jake talked about in his presentation, that bombproofing is even better.

A few years back this was a subject we used to cover quite a lot.  A short definition is that it is the difference between what a country exports and what it imports, although it’s become more difficult to see what is and isn’t a surplus, because companies base themselves around the world. It’s not that we don’t have a deficit we still do, although it’s got a little better post-Brexit because we haven’t been importing quite as much.  To be fair, it’s not something many people have been thinking about much during the pandemic, so it has drifted off.

It’s been really interesting. In 2020, the pandemic led to the markets crashing. But then at the end of November with this new Omicron variant, which has the potential to be more contagious than when the original one first entered public consciousness, markets fell about 3.5% on the day, nowhere near as much as in 2020. So, it’s almost as though markets are no longer shocked by the pandemic are becoming accustomed to it.  So even if the pandemic is around for the next two, three or even more years, I’m not expecting to see anything like the level of volatility that we saw last year.

We have two approaches depending on which fund it is. The UK Equity Income Fund is an equally- weighted fund. We have done a lot of work on this, and we have found that keeping it simple and having about 33 stocks each making up around 3% of the fund works best.

With the multi-asset funds, it is hyper-important that they stay within their risk parameters. It depends on how volatile a stock is and how correlated it is with the market. You could only hold a small amount in one stock that’s highly correlated with the market. On the other hand, you could have a stock that shows no correlation or only a little correlation with the market, which would allow you to increase its weighting.  So, to sum up, in the UK Equity fund the weighting is 3% for every stock, whereas with the multi-asset funds, there’s a much more rigorous approach.

We use the Quantitative Equity Selection Model, which has been around since 2010.This keeps evolving incrementally as we get more data and more ways of crunching data, and in many respects this is actually AI (Artificial Intelligence).

What we do is that we give each stock a score using what we call a normal distribution, which allows us to rank stocks. We have also used some of the more modern forms of AI, such as black boxes and hierarchical clustering. We were worried that we had stocks in different sectors that were behaving in similar ways, so this allowed us to work out whether a  sector had built up too much risk. There are so many ways we can look at the portfolio using AI,  and we are only going to add to those. There are a couple of the black box approaches we particularly like because they free us from any biases we might have.

We will continue to use AI where we think it can improve things. However, we won’t just jump in with it. It will be back-tested tested first on historic data to make sure it works.

Having these AI systems allows us to crunch massive amount of data. For example, to go through all 609 stocks that make up the FTSE All-Share Index, or the Emerging Market Index, which is made up of around 4,000 stocks. It allows us to go through company’s balance sheets, their cashflow and their earnings statements, and then we get presented with a list, and we start going through it from the top.  We run the list twice a week, but we are constantly looking at performance. We are literally screening millions of data points. It also drives macro ideas like the banks.

We use the Quantitative Equity Selection Model, which has been around since 2010.This keeps evolving incrementally as we get more data and more ways of crunching data, and in many respects this is actually AI (Artificial Intelligence).

What we do is that we give each stock a score using what we call a normal distribution, which allows us to rank stocks. We have also used some of the more modern forms of AI, such as black boxes and hierarchical clustering. We were worried that we had stocks in different sectors that were behaving in similar ways, so this allowed us to work out whether a  sector had built up too much risk. There are so many ways we can look at the portfolio using AI,  and we are only going to add to those. There are a couple of the black box approaches we particularly like because they free us from any biases we might have.

We will continue to use AI where we think it can improve things. However, we won’t just jump in with it. It will be back-tested tested first on historic data to make sure it works.

Having these AI systems allows us to crunch massive amount of data. For example, to go through all the more than 600 stocks that make up the FTSE All-Share Index, or the Emerging Market Index, which is made up of around 4,000 stocks. It allows us to go through company’s balance sheets, their cashflow and their earnings statements, and then we get presented with a list, and we start going through it from the top.  We run the list twice a week, but we are constantly looking at performance. We are literally screening millions of data points. It also drives macro ideas like our investment in the  banks.

Demographics looks at whether your population is increasing or decreasing. Also, is the average age increasing or decreasing? Then, there is the question; what are the consequences of that? Some countries, such as Japan have quite dismal demographic outcomes. Its population is reducing as wealthier families have fewer children. On the other hand, Angela Merkel (the former German Chancellor) changed all that when she allowed 1m immigrants in to Germany, which was a smart move from an economic point of view. One of the issues is that the population growth slows down as it gets older and the average age of the population tends to get higher. And this led to problems like we are seeing in the care sector, where there is a shortage of nurses and care workers to look after this growing number of elderly people. Are there enough youngsters coming through? If not, we will have a massive massive problem. What is beginning to change is that people are staying in the workforce longer, and I think the average age of people in work is going up.

I honestly think no. Because whereas gold has tangible value and people place value on it, which is why it’s commonly regarded as a safe haven asset Bitcoin is pretty much the opposite. There’s nothing sitting behind it. There are so many unknowns about it. I’m far from an expert on it. It’s incredibly complicated, and that’s one of the reasons why I don’t think it will become safe haven anytime soon. Also, it’s incredibly volatile. I don’t think you can describe anything that moves day-to-day as safe at all.

China has had a very positive effect in the world economy. So, certainly in the  last few decades it’s had a positive effect for holders of capital because companies have been able to source components much cheaper through China. So, China introduced a huge amount of low-cost labour into the global economy, which is all well and good if you’re in a job that is not being taken over by somebody from China. It’s not so good if you’re in a manufacturing job, which has been shipped to South China because the Chinese income per head is 1/5 of the US.

I guess it depends on your perspective. If you are very, very, green, then you don’t think China’s had a positive effect on the world because it is the main source of CO2 emissions.  Because of course, production of things like concrete and steel, which throws up more CO2 than anything else. And China’s been a hotbed for that. The US is significantly more efficient than the Chinese so the threat is that they won’t provide that low-cost base anymore and they are trying to move up the product line and just not be component manufacturers but move more into IT and provide sophisticated end  products. That’s why it’s trying to compete in the phone market.

On the other hand, hundreds of millions of people have been taken out of poverty, which has got to be a good thing, so, this a not simple thing to balance. But overall, loads and loads of people taken out of poverty and a new source of demand in the world economy at a time when the established economies were getting a little bit large and less innovative. So, yes overall, I think you have to say China’s had a positive effect.

I wrote a paper back in 2016. I took some time before deciding which way I was going to vote. But in the end, I decided to vote remain, my reasoning being that the Cameron government won a mandate to govern with a remain policy. I felt that if you had a remainer government managing Brexit it would cause a lot of mess. And I think that was proved right. My view is that a democratic vote for Brexit went through, so, you have to get on with it. As it was we were we made a quite a lot of money. Clients did very well that day. Because we were we were fairly short Sterling – in other words we were holding more in other currencies. I’m pleased we are through with all those shenanigans. So, yes, it could work. I think the EU has got an awful lot of sorting out to do going forward. A lot.

We’ve got two hats on with this stock. So, with our UK Fund, we screened for  value on a sector basis. We previously held Morrisons and it got acquired.  We look our scoring system worked within sectors, we held Morrisons and it got acquired. Obviously, this happens a lot with our companies because we’re always screening for fundamental value.

So, then we had to look for something else. Tesco sat in the same sector as it was quite high on our screen of potential target stocks, we bought it to replace Morrisons.

With our other hat on which is our multi-asset hat, which is the risk managed portfolio, our thinking was; Well this looks like a good price, a good stock to have, but how does it match up against the risk metrics we use for our multi-asset funds? So, we actually held it in the multi-asset funds as well. We felt it was an appropriate holding to use that equity exposure that we previously had with Tesco, so it’s in Our Cautious, Balanced, and Growth Funds, as well as in the UK Equity Fund.

I don’t think anybody denies that when you see kids drowning, trying to get across to this country, it’s heart wrenching, it’s terrible, and some of these families have come from the most dreadful of circumstances and your heart goes out to them. And lots of us here today can probably at some stage trace refugees back in our lines coming over to this country. The Americans are almost a complete nation built on refugees, and it’s not done them any harm. So, you have to help other people. That doesn’t mean you throw your doors wide open and you let anybody come in. Because clearly, the government’s view is that creates a number of different risks. So, I think it’s a terribly difficult thing for politicians to have to deal with. I am glad I’m not Home Secretary dealing with this every day, because you’re going to be criticised one way or the other for what you do.

But just broadening the question a little bit, clearly, we have a problem in this country at the moment because there are not enough workers for the jobs that need to be done. And that is post-Brexit and the government is going to have to decide what policy they’re going to implement. So, you need a balanced policy that enables people to come here if they work and make a contribution.

Take the case of the  US right now, they’ve got Chinese immigrants going in that prefer the US to China, not unlike it was in the US/Russia Cold War. And so, China is haemorrhaging brains because of its draconian policies, which will only benefit the US. China will not catch us up on technology. Bright, intelligent people want to go and work and have the freedom to do things, just like all the Jewish people that went to the US pre-World War Two for obvious reasons and provided a huge kick in technological improvements in USA. So, I’d much rather we had people constantly wanting to come here. When we really have to watch out is when we get lots of emigration and everyone wants to get out. then you’ve got to really worry. So yeah, economically immigration is a positive thing.

Productivity growth flatlined after the financial crisis, and there is a very interesting chart that shows how that has gone in line with compensation per hour historically for hundreds of years. And then around the 1970s, there was a big decoupling in productivity, where productivity begins to rise but there is was compensating rise in compensation for workers. More recently productivity has flatlined, and it is probably one of the most important things for long-term growth to get back up to the growth that we haven’t seen since the 60s and 70s.

We do need to boost our productivity. It something that we are always working on to improve but nothing’s really seemed to work yet.  We are hopeful that maybe the move to remote working will increase productivity, but we haven’t seen that yet.

When we watch the Budgets that’s one thing that we always look out for. What’s productivity done? Because if we start to see that rise, there’s going to be a huge compounding effect on the economy. And but it’s not come through yet. You know, the computer age has always meant to increase productivity massively. There is that famous quote by economist Robert Solow is, “You can see the computer age everywhere but in the productivity stats”. We continue to monitor it. If it does happen, it’s going to be like putting rockets under the economy.

One of the issues is that it is very difficult to calculate. It’s quite difficult to measure how much being able to use Google, for example, which is free, actually contributes to productivity because you don’t really record it and it doesn’t appear on company balance sheets. My view is that productivity is probably a lot higher than what is getting measured.

Nuclear is increasingly being seen as a sustainable source, with France generating between 70% and 80% of its energy from nuclear. Fusion is a different type of nuclear energy where you fuse atoms. Fusion power has a lot of advantages; no carbon emissions and an abundant supply of fuels, such as lithium and deuterium.  There is also less radioactive waste then fission and it is much safer than nuclear.

In theory you would be able to solve everything because it provides such a sustainable source of power. People have been reluctant to invest in it in the UK, but now that they see it will have a hugely positive impact on climate change even some former XR (Extinction Rebellion) people are supporting it. Even Jeff Bezos has put money into it. If it happens, it will be amazing.

However, a word of caution here. People aren’t very good at forecasting over long periods, and especially what the technology of the future looks like.

Take synthetic oil, if that meant that we could have sustainable petrol in our cars then there’s no need for electric cars and then a company like Tesla, which currently trades on more than 300 times earnings is worthless.

It goes back to our value philosophy, and our view that it is better to get into stocks at a reasonable price rather than chase the stock that looks like the future and trades at a ridiculous price.  That’s why it is really important to make sure you build a diversified portfolio, getting in at good prices and put your capital to work because you don’t know what the future holds.

Although we have been working on this over the last couple of months, we haven’t actually mentioned it this year, because we would prefer to have something tangible to show for the work that has been going on in the background rather than something that’s only half finished.

One of the things that a lot of fund managers have been looking at in the last couple of years is the UK Stewardship Code. This doesn’t just apply to the funds themselves. So, as well as being able to show that your funds are not socially or environmentally damaging, the Stewardship Code looks at the whole business.

There are about 12 different pillars that you need to meet and it dives into them quite deeply. It’s a complete overhaul of the previous version. The new version is very very stringent so they will take you to task to ensure that you are actually doing what you say you are doing. Everyone under our Courtiers umbrella will be looked at. Everybody has to meet the standard. Things like employee welfare and  well-being, ESG (Environmental, Social and Governance) and even how you manage your waste, every aspect of the business is looked at, detailing what you’re doing, what you have done, and what you’re doing to move forward

It’s quite progressive. Standards are getting tighter and tighter. And then it all gets compiled into a 200-page report.  Although it’s a lot of work, it’s not just a tick-box exercise, and it’s something we are keen to have. So, although I haven’t got a full answer for you at the moment, we’re not ignoring it, it’s not on the side lines. It’s just a lot of background paperwork. Our Compliance department have got the job of going through all those pillars at the moment, and in 12 months’ time we should have something more tangible to show you.

There is an argument over nuclear. Some people think it’s really clean energy, but equally then you’ve got the other half thinking it’s not clean energy and if things go wrong it will have really catastrophic effects. There’s a whole host of renewable technologies;  you’ve got biofuels, you have got wind, a lot of money at the moment is going into solar and wind farms. But even with biofuels there’s arguments over whether that’s renewable or not. So, it’s kind of just seeing which technology tends to take off first.

Countries’ perception of nuclear differ, so that countries like Japan still have coal plants because obviously they had the Fukushima disaster. But actually, there was an Extinction Rebellion (XR) leader called Zion Lights. And she’s actually now turned her back on XR and become a nuclear power lobbyist, because she went away and did some research and realised that with demand for energy growing the only way that we’re going to meet our energy needs sustainably is through nuclear. So, yes, maybe can have more nuclear in the future.

Developing countries should be allowed to develop with as little influence from developed economies as possible, apart from opening up to free trade (something the EU is reluctant to do, especially if it hits the pockets of EU farmers!). Sometimes staying out of another country’s business is very hard because we witness how internal conflict ravishes the lives of ordinary citizens. But it’s not up to the developed nations to project power and force societal values and laws on peoples from other nations. That may be different where a despotic government is committing atrocities, like genocide, when intervention can be argued on the grounds of enforcing international laws and with the support of the United Nations.

Refugees that are fleeing due to hunger and/or safety should be fed and homed. Illegal economic migrants – i.e. those that are simply wanting to get a better life in a territory with relatively high GDP per head, like Europe, should be denied entry, returned to their home country and have the process for legal immigration explained to them. But we should, when determining immigration policy, bear in mind that countries with relatively accommodative immigration policies have generally flourished.

The wealthiest country in the world, the USA, was built by immigrants and the open policies reflected by the poem “The New Colossus” in the late 19th century paved the way for decades of success. As a reminder, here is the text;

‘Not like the brazen giant of Greek fame,

With conquering limbs astride from land to land;

Here at our sea-washed, sunset gates shall stand

A mighty woman with a torch, whose flame

Is the imprisoned lightning, and her name

Mother of Exiles. From her beacon-hand

Glows world-wide welcome; her mild eyes command

The air-bridged harbor that twin cities frame.

‘”Keep, ancient lands, your storied pomp!” cries she

With silent lips. “Give me your tired, your poor,

Your huddled masses yearning to breathe free,

The wretched refuse of your teeming shore.

Send these, the homeless, tempest-tost to me,

I lift my lamp beside the golden door!”

I never cease to find these words inspirational.

Commodities and property both serve as effective components of a diversified investment portfolio. The precious metals, like gold and silver, have long been viewed as an inflation hedge, while more practical materials such as copper and natural gas often appreciate as the global economy picks up and the materials and industrial sectors boom. Property, like infrastructure, is also a good diversifier as it can provide reliable income during times when the more traditional asset classes, namely equities and bonds, are in turmoil. However, if I had to choose one asset class to invest excess cash into, it would be equities, as over the long run they have consistently provided superior real returns versus the other major asset classes.

Whilst we love the discipline the model gives us when selecting value companies, you can never create a perfect model for an imperfect world and that requires some flexibility in the face of a large-scale event. An example of this would be when Covid first hit and governments around the world were responding with lockdowns. We had to re-evaluate the companies held in the portfolio and look at how long they would last if they had no revenue but their costs continued. In this scenario the companies that had enough cash and liquid assets to survive a prolonged lockdown were better value than ones that couldn’t.

This was almost entirely as a result of what happened on Friday 26 November, when markets fell about 3.5% due to the uncertainty surrounding the new Omicron variant. This was one of only three times in 2021 that markets moved by more than 2% in one day. The fact that it was just 3.5% compared to last year when markets fell by 30% in just one month reflects how  they have effectively gotten use to ongoing Covid news. Obviously, volatility is still above its long-term average level at the moment and probably will stay like that until Covid comes under control. Don’t ask me when that’s going to happen, because I don’t know, but this is just a short-term wobble due to the uncertainty around the Omicron variant.

As regards the ‘green revolution’ while there is a framework, as with a lot of legislation nothing moves quickly and it hasn’t moved forward. In terms of whether the UK is moving faster or slower than anybody else, we still need to put the infrastructure in place. It isn’t there yet. So, they have chucked a lot of money into infrastructure projects. And they’re looking to build a whole host of electric vehicle charging points, so you haven’t got that range anxiety when you’re trying to go from one end of Cornwall to the other end of the country in Scotland and we’ve only got one charging point there. I wouldn’t say the UK is moving quicker than any other nation. We may have put it onto paper quicker. But that doesn’t necessarily mean the country is moving forward quicker.

China obviously has a problem, which is the need for power in a rapidly industrialised economy. Unfortunately, whilst the West has all been reducing its carbon footprint China has been increasing theirs, as has India quite significantly. And they have revolutions if people suddenly can’t get power. What is clear is that they care about their economy as much as anybody else – they are just prepared to delay getting there. They are also big advocates of green energy and they are trying to go down the more electric car route. But electric cars need power to be generated, they’re not carbon free if the power from the car batteries is from a coal-fired power station. So, no I don’t think we’re handing a lead to them. I think the West will take the lead on this and I think China and India will follow.

Brunel was a prolific inventor, so harnessing the ‘Brunel spirit is a nice call to action, but it’s important we test technology before we roll it out otherwise we could end up in debtors’ prison like Brunel did in 1821.

A lot of research goes on behind the scene to prove projects are effective.

Interestingly, we were asked a question last year about the idea of replacing the gas network in the UK with Hydrogen. We took a position in the infrastructure fund, INPP last year. They own part of the gas network in the UK and are working with Keele University to replace some of that gas with cleaner hydrogen.

The project is called HyDeploy and it shows that a lot of research needs to be done into the viability of these projects before we jump in to make sure they will achieve their goals and be a good use of capital.

So, we harness some of the Brunel Spirit, but overlay that with our own criteria of responsible use of client capital.