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RHS Chelsea Flower Show: Influences on Portfolio Management

11 May 2016

Jonathan Marriott, Chief Investment Officer

Wandering amongst the exhibits at the RHS Chelsea Flower Show I start to think about my garden like an investment portfolio a potential client may show us. Neither is doing what we want it to do, there are gaps and the climate is changing. The vegetable plot is yet to be planted and there are weeds to remove. At Chelsea I can see ways to improve the garden. Many portfolios come to us with similar problems. Part invested, not enough yield, investments that have gone wrong and the economic climate is changing. What to do?

Firstly weeding what needs to be removed. My preferred definition of a weed is a plant growing where it's not wanted. Many weeds were introduced to gardens as ornamental, think Japanese Knotweed, but have turned into a nuisance and failed to do what was wanted. Often investments are made that disappoint and fail to perform in the way the manager expected and these need to be cut out.

When we visit the Great Pavilion at the Chelsea Flower show we see specialist plant exhibits. We may go to Downderry Nursery who exhibits nothing but Lavender, varieties old and new. As a portfolio manager when we want to get exposure to a specific sector or region we consult a specialist for the right individual equity.

We want more yield from our garden and our portfolio. At Chelsea we seek out the specialist seed merchants who can provide the best seeds to be planted in the right season. As investment managers seeking yield we have various ways to do this and seek out the higher yielding funds, bonds and equities to meet this requirement.

When we see a show garden we see an idealised garden. When a portfolio manager shows an initial example of a portfolio he is similarly showing the client what is possible. A garden designer like a portfolio manager creates a garden or portfolio around the needs and circumstances of their client.

The machinery stands show us all the latest gizmos for controlling and taming a garden. Mowers, weeders, rotavators, and pruners vie for our attention. These are the computer systems that manage risk and control our actions as a portfolio manager. Neither weeders and mowers or computer systems will help if the basic building blocks and overall design are wrong.

We are being warned of climate change and for the last five months the El Nino is being blamed for record high average global temperatures. This climate change is encouraging French Champagne producers to buy land in England. It is also affecting what we can grow successfully in our domestic gardens. We need to plant according to the seasons and the longer term changes in the world.

Economically we need to recognise the world has changed. While some cycles remain in place, low interest rates and central bank intervention are changing the way we invest. While interest rates may rise, the Bank of England expects them to do so slowly and peak at a much lower rate than in previous cycles. We need to adjust what we do in portfolios to reflect these changes.

We are delighted to be working with garden designer, Paul Martin to create ‘Vestra Wealth’s Garden of Mindful Living’ at this year’s RHS Chelsea Flower Show. Come and see us at garden number MA427.