Clients warming to Sarasin’s two-pronged thematic process

The relatively strong recovery of the UK economy over the past couple of years, if compared to the rest of the world, is a key growth driver for the country’s wealth management business. 

“I think we are moving into the point of the economic cycle where the table has turned,” says Jamie Black, partner, head of private clients at London-based investment management firm Sarasin & Partners (S&P) “The number of private income transactions has been rising, cash has been coming back into private hands and hopefully looking for home in the stockmarkets, and that is a big driver of new client business.”

A pioneer of the long-term global thematic approach to investing, Sarasin & Partners manages £13n (€17.7bn) in client assets, mainly discretionary mandates for private clients, charities and institutions. 

Private client assets, predominantly sourced from UK-based wealthy families, have risen more than 30 per cent over the past three years to £2.5bn. Of these, around 10 per cent come from American clients, served through a dedicated subsidiary headed by Mr Black, Sarasin Asset Management – “one of the very few London-based firms able to look after both US residents and expats”.

Sarasin funds, also distributed through third-party intermediaries and Bank Safra Sarasin, whose importance as a distribution channel has drastically reduced over the past 20 years, are extensively used in client mandates. “When we talk to clients, we are first and foremost talking about our investment process and our DNA, which is global asset allocation and global thematic equity processes,” says Mr Black.  

The two-stage thematic process starts from the identification of opportunity sets, or secular trends such as demographics, consumer or government behaviour, which the firm believes will not be “particularly buffeted” by the cyclical global economy. The second filter for stock analysis is provided by a handful of core investment themes, which are “share price trigger”.  

‘Corporate restructuring’ has been a core equity investment theme since the firm introduced the process in the mid 1990s. Others have evolved. For instance, the ‘intellectual property’ (IP) theme has morphed into ‘disruption and innovation’, which guides the stock analysis towards disruptors of established business models, such as US membership-only warehouse club Costco. 

As a result, the firm’s investment process is very much focused on mid to large cap, multinational companies, with more investments in the US market – a “healthy hunting ground for equity investors” – than most of its peers. 

“It’s not a marketing exercise,” insists Mr Black. Most clients, obviously, are interested in decent returns, with the lowest possible volatility, he says. “But I think they want to know the manager is really passionate about the process and will apply it consistently going forward.” 

As a fund manager unit, based in one location, with no regional offices around the world, it is important to have a clear framework for the analysts’ work, he says, so that the time of the 82 investment professionals, based at the Sarasin offices overlooking St Paul’s Cathedral, is used productively. 

The vast majority of private client money is in multi-asset mandates, where equities are normally the dominant asset class. Environmental, social and governance factors are embedded in the stock selection process.

For specialist areas, such as smaller companies, distressed debt, private equity or infrastructure, the firm uses specialist fund managers selected in-house.

While bonds do not offer great value, equities will continue to be attractive over the long term, according to S&P, with European and Japanese exporters in particular set to benefit from continued aggressive quantitative easing.

As the search for income becomes more challenging, “the large cap equity space has generated very powerful dividend growth stories,” reports Mr Black. This equity style has been a pillar of the firm’s investment process over the last two to three years, has been quite popular on  the market and has performed reasonably well, he states. “We think this will continue in a low interest rate environment.” 

Fifty-four per cent of the investment firm is owned by Bank Safra Sarasin, which provides “powerfully strong balance sheets in the background, which is comfortable and it has always been”, he says, referring to the time before Safra Group acquired the Swiss bank from Rabobank in 2011. The remainder is owned by the management of S&P. 

“The equity ownership structure aligns our interest with our clients’ interest and contribute to continuity of staff, particularly on the client side of our business, which is something we really treasure,” adds Mr Black.