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Growth is stressful

Growth is stressful
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Our locked down nation has found a new obsession amongst baking banana bread and trying to find the mute button on zoom – our mental health – or perhaps more specifically the mental health of our younger generations. It is quite rightly, a topic we now all speak about freely and openly and the focus of numerous web pages, newspaper columns and social media feeds. The fear of freezing the hopes and dreams of a generation goes much further than worrying about whether the kids will ever fly the nest.

What can we do about it?

The resilience of youth is going to be a requirement for a post COVID recovery likely to be dependent on risk and creative, innovative thought. And our younger generations are much more resilient than the commentariat perhaps gives them credit for.  This is the generation facing ever higher personal debt, increased house prices and reduced freedom of movement, certainly within Europe. However, even in the face of a global pandemic students are still attending their online courses, first time buyers continue to save for deposits and plans for a different relationship with Europe continue apace.‍

It is this willingness to accept a “new normal” that will drive future market sentiment and ultimately deliver success.  High net worth families and their advisors are very well placed to deploy capital quickly and flexibly, reacting to new and emerging trends much more effectively than their larger fund counterparts.

“In the midst of this brave new world, private equity retains its evergreen appeal.  In fact it is at this very point in time that history tells us it comes into its own, especially in the UK.”

David Mitchell

Set up shortly after another seismic global event, World War Two, the Industrial and Commercial Finance Corporation (ICFC), identified and invested in small and medium sized enterprises, typically in the manufacturing and infrastructure sectors.  It proved to be an engine of our post-war growth crucially focusing on strong regional businesses through an investment network, “levelling up” the UK long before the phrase became fashionable.

How can we learn from our history

In the midst of this brave new world, private equity retains its evergreen appeal.  In fact it is at this very point in time that history tells us it comes into its own, especially in the UK.  Set up shortly after another seismic global event, World War Two, the Industrial and Commercial Finance Corporation (ICFC), identified and invested in small and medium sized enterprises, typically in the manufacturing and infrastructure sectors.  It proved to be an engine of our post-war growth crucially focusing on strong regional businesses through an investment network, “levelling up” the UK long before the phrase became fashionable.

Ultimately the ICFC transformed into the private equity giant 3i, the stalwart of many a pension fund and infrastructure programme but Mr Sunak would perhaps be wise to provide similar tax incentives to allow smaller funds to provide the same level of regional expertise and focus.  Bigger private equity funds, such as 3i, being favoured by institutional investors will see a rise of smaller independent funds backing SME’s providing a golden pool of opportunity for high-net-worth investors.

How should we lead the world from a COVID recession?

Resilience, an appetite for risk and innovation and a new respect with which we treat both our physical and mental health will lead the world from a COVID recession. Growth has always been a stressful endeavour but the resilience already being shown by a “locked down” generation could make our new future as a truly independent nation a very exciting one.

Larger fund investors do not hold a monopoly on examining a business’ environmental, social and corporate governance.  Bespoke private equity puts clients closer to the investment market, aligning values, traditions and ensuring local social responsibility remain a key driver.

Finally, this flexibility when combined with taxation savings available increase the attractiveness of the private equity strategy. Capital gains tax rollover, income tax and inheritance tax mitigation support those investors being prepared to take managed risk.

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