Assessing the risks and rewards faced by the investment community

Scotsman Conference "Investment 2019" at The Principle Charlotte Square 05/03/19

The special event, chaired by The Scotsman’s Bill Jamieson, saw invited speakers discuss the threats and opportunities that investors will face in the coming years.

David Coombs, head of multi-asset investments at investment managers Rathbones, told delegates that it was a prerequisite for every company his firm invested in nowadays to have a robust strategy for dealing with cyber crime.

He said: “The biggest threat to investments comes from cyber crime. Every company that we invest in now has to take this seriously. We now deal with companies who have their own in-house team of experts who look for weaknesses in their own systems.

“We need to take this very seriously as it is not going to go away. This is the biggest macro threat investors will face over the next ten years.

“There is opportunity in this situation, however, and we should be looking to invest in companies that can provide solutions to the cyber crime problem.”

Coombs then pointed to the HSBC hack of US customer accounts in November last year which saw hackers access personal details, including account numbers and balances, statement and transaction histories and payee details, as well as users’ names, addresses and dates of birth.

He expanded: “When you look at when HSBC was hacked there was not one pound that was stolen. Someone hacked into a bank and did not steal any money. At one time this would have been considered incredible.

“What they were after was more valuable, however. They stole personal data.”

Earlier at the event, Caspar Rock, chief investment officer at Cazenove Capital, outlined the pressures that Brexit and the China-US tensions were having on the investment market.

He said that a sustained downturn was not likely over the next two years, but that the economic climate was definitely less heated.

“We are not going into recession in 2019 or 2020 but it is clearly getting cooler,” he added.

“Inflation is not a problem right now, however, we do expect it to pick up in 2019.”

Rock added that the outcome of the trade war between the US and China would be of crucial importance to the prospects of investors.

He argued that the trade dispute, which began in January of last year with the US imposing tariffs of up to 30 per cent on Chinese goods, was actually about the protection of intellectual property rights, as far  as Donald Trump was concerned, and not about safeguarding American steel jobs, as the US President argued.

Investors were also urged to keep an eye on the beleaguered high street retail sector, following a number of successful innovations in the states.

Faced with fierce competition from Amazon, American retailers are now focusing on their in-store experiences and service as a means of competing against the online retailer.

Coombs said: “Home Depot are now putting more staff into branches and improving their stores so that people can easily find what they are looking for.

“Their digital strategy complements their in-store experience as their app helps people to navigate around their stores.

“They cannot compete on price with the likes of Amazon, but they can compete on service. Companies who cut service see their long-term revenues decline.

“For us, we will look to invest in companies that treat customers as importantly as shareholders.”

Mark Whitehead, head of income at Martin Currie, told the conference that it was vital for those looking to retire with a comfortable income to have a sensible investment strategy in place.

He said: “People are living longer and will spend, on average, 19 years in retirement.

“Most people at the moment are saving for only seven years, which means they will have to lower their living standards, live off equity or leave less for their children.

“It is notable that 25 per cent of retirees are now returning to the workforce.

“We all need to save more, and equities income is one of the best ways to achieve this.

“We advise a global and diverse approach that targets high-quality companies.”