Hamilton Financial  >  Newsletter  >  Hamilton Financial Quarterly Digest (January 1st to 31st March 2023)


Living in Scotland, we have become accustomed to a First Minister adept at deflecting attention from her domestic record by pointing to the “shambles” at Westminster (Boris was a gift that kept on giving!). Out of the blue, Nicola Sturgeon resigns, leaving the SNP Government in shock.

(STOP PRESS: news has come in that her husband Peter Murrel has just been arrested for suspected fraud.)  

Meanwhile our new Prime Minister Rishi Sunak, despite the many challenges he faces, has quickly established himself as a man of principle with an intellect to match.  When last autumn he stood –  unsuccessfully – for the job of PM, I remember him saying that his number one priority would be to defeat inflation. How right he was then and how right that statement still remains.

nicola sturgeon


Mindful of all the uncertainties home and abroad, we have been concentrating on making our client investment portfolios as resilient as possible.  That has meant adhering tightly to our proven investment style, at the heart of which is a broad mix of asset classes, geographical sectors and fund manager expertise Other characteristics of our style include avoiding passive funds and the temptation to over diversify. (Terry Smith’s essay on over-diversification is here.)

Ultimately, we try to pick the “best of the best” funds, as long as they aren’t standing at an unrealistic premium to net asset value.  Managers’ past performance is helpful, but it is not a guarantee of future performance.  The most important function of a Wealth Manager we think, is to meet and interview the fund managers (Zoom has made this much easier).   We are quite zealous about this and it is amazing how quickly you can differentiate between “wheat and chaff” simply by talking to them! Do we always get it right? No, of course not, but by talking, you are likely to enhance the chances of picking good funds.

In the last 3 months, we have met most of the managers whose funds we rate. I have selected notes from 3 recent meetings which give you a flavour of the sort of questions we ask and the answers given. Crux Asia Pacific ex Japan (Ewan Markson-Brown – best summed up by the video here), LF Havelock (Matthew Beddal & Neil Carter – interview here), Richard Shepherd-Cross of Custodian REIT here and Ecofin Global Utilities and Infrastructure (Jean- Hugues de la Lamaze – interview here).


Given the ubiquity of ESG, we thought we’d give you our hot take on it.

ESG investing refers to a predetermined set of standards by which companies are screened and ranked for their “green” credentials. As you can imagine this is an incredibly subjective process and has led to accusations of “green washing”. Rather than try to attempt to unlock this process, I have tried to analyse exactly what ESG stands for and how it is beginning to affect the way in which investors think.

pie chart


You would have had to have been living on Mars not to have picked up on the anxieties around the environment. Much of it revolves around pollution and toxins; toxins in the air we breathe, the water we drink and the food we eat.

Here are some examples of environmental factors that can be ESG criteria:

  • Energy consumption and efficiency.
  • Carbon footprint, including greenhouse gas emissions.
  • Waste management.
  • Air and water pollution.
  • Biodiversity loss.
  • Deforestation.
  • Natural resource depletion.

The problem with ticking the Environmental box is that so many measures to improve the environment comes at a cost to the environment. For example, onshore wind energy. For the turbines to be effective, they need batteries (which use a resource called Lithium) to store the electricity generated on windy days; they need engines powered by fossil fuels on windless days; they need manufacturing plants to make and deliver the turbines; they play havoc with nature’s sanctuary for our moorland birds, insects and wild animals. As a friend of mine succinctly said, “Beauty is hard to create but easy to destroy.”

wind turbines

On the subject of Onshore Wind Energy, I was interested to hear from Jean-Hugues de Lamaz of Ecofin Global, an investor in Infrastructure and Utilities and one of our target funds. I quote,” With the advent of Offshore wind farm technology – an amazingly efficient way of generating green electricity – Onshore wind farm technology is already out of date.”

All that said, many investors – especially younger investors – are as keen on ESG as they are to achieve respectable investment performance, a challenging knot to unpick trust me!

To illustrate a responsible fund manager’s approach to ESG – as opposed to paying lip service – I recommend that you read this thoughtful paper from Waverton, a fund manager we have followed for some years.

I recently spoke to Jennifer Fisher, Head of Equities at Waverton. To my surprise, she made a plausible case for investing in Shell: ” Shell Natural Gas have embarked on a programme to transition to net zero. This transition can’t happen without the “big players” : they are the companies with the money to invest and the ones that can afford to take the long view.”


The Social component of ESG is all about relationships. In particular, it addresses how a company manages its relations with its employees, financial stakeholders, the communities in which it operates and the broader political environment. There are companies which are superbly managed: I would argue that the John Lewis Partnership – a company that has traditionally been owned by its employees –  would have been one such company where employees are properly treated and looked after. So, I decided to look at their website and have downloaded their values

  • DO RIGHT: We act with integrity and use our judgement to do the right thing.
  • ALL OR NOTHING: We put everything we have into everything we do.
  • GIVE MORE THAN YOU TAKE: We put more in, so everyone gets more out.

Yes, you might think this terribly woke, but the truth is that John Lewis – despite the challenges of COVID and Amazon – still leads the pack when it comes to the treatment of employees.

Another company that stands out for me is AJ Bell Investcentre, the people who provide the platform on which our client portfolios sit. When you ring them up, you might wait 5 seconds before an operator picks up the phone and says, “Good Morning, how can I help?”. It’s an old fashioned but deeply helpful telephone advice line. I will bet from the quality of the staff on reception that Andy Bell runs a good ship. That is the thing, isn’t it? You can usually tell pretty quickly if the staff are happy; and if they are, it usually translates into good profits for shareholders.


To go back a bit, fund managers have for many years been mindful of the importance of Boards of Directors that act with integrity, putting the interests of their company’s employees and shareholders before their own.

There have been some notable examples where investors have lost money thanks to poor company Governance. Think of Baring Brothers (1995), Equitable Life (1998),  Royal Bank of Scotland (2008) and many others – you can read more by looking at this link.   Assessing the ethics of a company based in say China or Latin America can be particularly difficult.


Last word on ESG.

The Association of Investment Companies ( AIC) is a website we look at a lot. The Association provides a service to help its members – Investment Trusts – to broadcast and summarise their key facets – e.g, sector, past performance, fund fact sheets, dividend history etc. One of the areas they cover is ESG. Click on this link to find out more:

You can see for yourself how helpful the AIC site is not just to its members but also to investors such as ourselves.


For the last 13 years Terry Smith has run an immensely successful unit trust called Fundsmith. When we first started to invest in Fundsmith it was about a billion or two in assets under management. It reached £26 billion in April 2021 but has – like many funds over the last 2 years – retreated. It is now only £23.5billion!

Recently, we started to reduce our exposure to Fundsmith, not only because of its size, but because in 2018, Mr Smith started another fund – Smithson – with £2.5billion of AUM and specialising in Global smaller companies. In addition, he has moved his home to Mauritius, a tax haven where income tax and corporation tax are 15% (as if he hasn’t got enough money already). Plus he has taken his partner of 15 years to court for theft, which she denies. Quite a few distractions, you might think for a man in charge of two funds with a combined value of £26billion.

Having said all this, Mr Smith’s views on investing are compelling. You can read his views on why he would never invest in banks here.

I have never before seen anyone take issue with Terry Smith – such is his stature in the investment world. I was therefore intrigued to read this article by Sean Peche who runs a small but successful unit trust called Ranmore challenging Mr Smith’s verdict on banks.

And just to rub it in, the performance in the last 12 months of Sean Peche’s minnow fund is up by 20.9% as against Fundsmith which is up for the year to 31st March 2023 by only 3.1.%.

This underperformance is untypical of Terry Smith. Like him or not, you cannot criticise his long term investment record (5 years cumulative 76%); it’s just that when you become as successful as he has, there is usually a reality check – just look at Scottish Mortgage, the Baillie Gifford flagship fund which has seen a drop of over 50% in the last 2 years.

youtube video

Finally, here is a 10-minute video of Terry Smith defending the recent Fundsmith poor performance (as a side note, I rather like his punchy and combative style!).  In my opinion, he is dead right about equities versus bonds and “alternative” asset classes describing equities – currently – as the “least bad” investment asset class to hold!).

Just one more Cornetto! What we’ve been talking about over at our socials and why you should be following us?

Among other things (AIArk Invest Big Ideas), we love this one. Archie, my son, kindly pointed me to this interview with Giles Martin, son of George Martin (who was oft celebrated as the 5th Beatle).  Archie knows how much I loved the Beatles – I saw them live in 1963 – they were such a good band, such good fun in real life with songs that will live forever. Giles has just finished an overhaul of their seminal album Revolver and explains how he’s reinvented it in a whole new way using an incredible range of new technology. That interview is here.

beatles art

See you over at Linkedin or Facebook soon?

Hoping that you will have had a Happy Easter.

With best wishes,