Cazenove Capital

We have three key investment beliefs
1 The long term power of compounding – we believe that long-term investors are rewarded for holding
real assets
2 Diversification to help the journey – we seek to reduce volatility thereby smoothing the returns from a
long-term investment portfolio
3 Active decisions – we believe that financial markets are inefficient and that an active manager, using the
appropriate resources in a coherent, consistent and disciplined approach, can exploit opportunities;
adding value at each of the three stages in our investment process
We believe that business or economic cycles have an important influence on asset prices and this premise
informs our approach to both tactical asset allocation and investment selection. Our approach recognises
that different asset classes, sectors and stocks outperform at different stages. We aim to produce consistent
performance throughout these cycles, adding value through both asset allocation and investment selection.
We have strong environmental, social and governance credentials. We take a patient approach to
investment with sustainability central to our investment process.
Our investment process
Our investment process seeks to optimise risk-adjusted returns and draws on the expertise of the Schroders
group and other leading investment houses. It comprises three elements: strategic weightings; asset
allocation; and investment selection.

Addressing the three stages of our investment process (strategic weightings, asset allocation and investment selection), a dedicated investment team interprets house policy to recommend an appropriate investment strategy for each client. This team is responsible for investment decisions, adhering to guidelines in place at the outset of appointment. We act in partnership with every client to ensure that any agreed investment strategy remains suitable.

1 Strategic weighting
Strategic weightings establish the framework for a portfolio’s expected risk and return over the long term. This stage helps to determine the balance between risk and return or to target a specific return, while minimising risk or volatility over the long term. Importantly, our process includes detailed analysis of the impact of spending and inflation on a portfolio’s long-term real value. We carefully consider each client’s investment objectives when designing a suitable investment strategy.

The chart below illustrates the range of portfolios that we manage
to achieve returns from capital preservation to inflation plus 5% per
annum. Our recommended approach – the Responsible Multi-Asset
Fund – is classified as Growth portfolio and has an inflation (CPI) plus
target over the long term.

2 Asset allocation
The strategic framework is then overlaid with our current asset allocation policy, beginning with the wealth management investment committee (WMIC), which utilises research from both inside and outside the Schroders group. This information is both quantitative (such as technical analysis) and qualitative (such as earnings forecasts).

WMIC sets direction as to the expected outlook for different asset classes and regions as well as agreeing the changes (such as asset class weightings, investment styles and portfolio holdings) to be made to our core investment strategies. The charity investment committee (CIC) interprets the house view from WMIC and sets overall policy for our charity clients. Individual asset classes are covered by portfolio managers from across the firm, collated into asset class groups (ACGs). The research is fed directly to WMIC. We believe that this level of involvement is essential to our success. Business and economic cycles Integral to our investment process is an understanding of where we are in a business or economic cycle and tilting portfolio construction to asset classes and investments that we believe will outperform at each stage. We spend significant time anticipating the position of the cycle and the potential strength of the recovery or the contraction, which helps to determine our asset allocation positions. For example, we favour assets like equities and commodities in a period of growth. This process is illustrated below.

3 Investment selection
Once we have finalised the strategic framework and the tactical position, we select the most appropriate underlying holdings. - see holdings for Responsible Multi-Asset Fund below.

Recognising the erosive effect of inflation as a key risk, the majority of our charity clients have investment objectives based on maintaining the value of capital in real terms while generating a sustainable level of income to support ongoing activities. Furthermore, environmental, social and governance activities are an important factor for an increasing number of our not-for-profit clients.

The mode of implementation is determined by each client’s requirements. We offer a comprehensive range
of actively managed in-house and third party funds as well as passively managed third-party funds through
our open architecture platform. We also offer direct equity and direct fixed interest portfolios, often to
accommodate bespoke ethical restrictions.

Risk control is central to our investment process. On a day-to-day basis, portfolio managers and front office
line management have primary responsibility for risk management. Line management usually consists of a
team head who in turn reports to a department head.
The investment risk committee (IRC), which meets at least quarterly and is chaired by Cazenove Capital’s
chief executive officer, is ultimately responsible for overseeing our control processes and oversight
mechanisms. It is a sub-committee of Cazenove Capital’s management committee and seeks to ensure that
Cazenove Capital’s investment, portfolio management and control processes are effective. The risks that the
IRC focus on include, but are not limited to:
? clients being mapped to incorrect models with respect to risk appetite
? models being out of line with target asset allocations
? models being out of line with house investment policy
? specific portfolio managers taking inappropriate risks
? holdings in portfolios breaching client restrictions or house limits
? regular due diligence on assets not being undertaken
? aggregate positions on liquidity and concentration being mismanaged
Our internal audit assurance provides the next line of defence in monitoring investment risk, providing
periodic assurance as to the effectiveness of our controls and independently validating the risk management
framework as part of a broad audit programme.
Finally, our external auditors, Ernst & Young LLP (EY), independently review the internal controls of our
investment management activities and propose any improvements. Our compliance, risk and internal audit
departments work closely with EY to ensure a cohesive framework throughout the company.
We employ a number of tools developed by both Schroders and third parties to monitor risk in our clients’
portfolios. In particular, we use Portfolio Risk Investment Strategy Manager (PRISM) and Style Research to
analyse sources of risk in equity portfolios and Schroders Multi-Asset Risk Technology (SMART) to analyse
risk in multi-asset portfolios.

We have considerable experience of running a wide range of mandates from many different types of
charities. We would be delighted to provide relevant performance data once we have been invited to submit
a proposal for a specific mandate.

Our investment management services include internal custody facilities. The cost of these facilities is covered by our investment management fees described under point 27. We are also able to work with charities with external custody arrangements