Interview – Esmée Fairbairn Foundation
INTERVIEW – MATTHEW COX
“Money should be deployed to make a difference.”
As investment director of environmental, communities and social justice charity Esmée Fairbairn, Matthew Cox takes a long-term view of managing his £1.5bn portfolio, which has produced stag- gering results. He tells Andrew Holt about the attraction of com- plex strategies, greenwashing, being a good guardian and about keeping calm and carrying on in the face of market volatility.
You are working to provide long-term sta- bility and liquidity to finance the charity’s work, while maintaining the real value of the endowment. How does that translate into an investment approach?
Our target is UK inflation + 4%, which is more challenging now than it was a few years ago. We preserve the real value of the endowment and spend the 4% on grants – around £40m to £50m a year at present. It’s a challenging target and it would be much more difficult if we didn’t have an allocation to illiquid investments. Our long-term time horizon means we can lock up a proportion of our money for 10 years plus, the aim being to earn an illiquidity premium. That has been a key part of our investment strategy. The pro- portion of illiquid investments has risen steadily over the last 10 years. It is now
14 | portfolio institutional | November 2022 | Issue 118
about a third of the endowment. Along- side that, we focus on cashflows. We are less bothered about short-term fluctua- tions, certainly month-on-month, and even year-on-year. We do a lot of stress testing on cashflows because of the illiquid part of our portfo- lio. Regardless of where the market goes in the short term, we try to stay focused on the long-term picture.
How then does your asset allocation breakdown? We have approximately 35% in private equity, biased towards venture capital and growth funds – many based in the US. A third of the portfolio is in global equity funds. Around 15% is in hedge funds, with the rest in cash and a small amount in fixed income.
Cash for us is slightly higher than it would normally be, around 9%, because valua- tions have been relatively high. We hope those will come down, and then we can find more opportunities.
What do you have an allocation to instead of fixed income? We wanted something that could diversify our equity holdings, and in nor- mal circumstances that would be bonds. Instead, we have an allocation to hedge funds. Some are long-short strategies, some have market exposure with manag- ers we like. That allocation, as I men- tioned, is about 15%.
You are a long-term investor, but willing, where necessary, to not follow the crowd. How is that reflected in your investments?
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