This month’s comment comes from Diane Seymour-Williams. Diane Seymour-Williams is a founding partner of Acorn Capital Advisers, an independent adviser to family offices and families. Her executive career in investment management included roles as CIO, CEO and portfolio manager.
A landed estate of thousands of acres under generations of family ownership paints a picture of tradition and stability. However, this is far from the truth for many families, trustees and their advisers, who need to embrace change to preserve estates for future generations.
Asset rich, cash poor landed families are focusing on increasingly diverse ways to generate income to support and maintain their estates, including the ‘big house’, commercially let properties and agricultural buildings. Families with access to investment portfolios sufficient to fund their lifestyle and estates are few and far between.
Diversifying business interests
Financial portfolios are modest in relation to total wealth; dwindled by death duties and other taxes; making other provisions for children or simply maintaining the estate. Diversification away from farming may result in new income streams but also necessitates capital commitments and, importantly, clear decisions about how to raise and allocate that capital efficiently.
The availability of 20-year loans secured against the estate, is enabling families to take advantage of low-interest rates to raise capital to diversify into financial markets and enhance returns. Others have invested in renewables, helping secure steady future cash flows. Increasingly, we see borrowings funding some highly entrepreneurial businesses, spawned to support the estate and their tax position. The catalyst is often a transition to the next generation, bringing fresh thinking and a strong desire to modernise for future generations.
To win you have to risk loss
Attractive long-term returns are not generally achieved without adopting some risk and so we applaud forward-thinking families who have taken bold steps to secure their estates for future generations.
Take Badminton and Goodwood as archetypes. The Badminton Horse Trials have been making a significant contribution to the maintenance of the estate for over 70 years. Goodwood is a shining example of diversification and successful commercialisation of the estate that now includes the racecourse, Festival of Speed, hotel, club, and shop plus over 40 acres dedicated to Rolls-Royce’s headquarters and manufacturing facilities.
Within financial markets we allocate capital based on projected returns and risks, informed by decades of data and the expertise of strategists and economists. It is harder to allocate capital effectively across real assets and businesses.
Decisions often cannot easily be reversed, and we suggest appraising projects using a common cost of capital and a simple return hurdle to reflect the perceived risks. This provides a useful framework for families and trustees to compare opportunities and engage and reach decisions. It is also important to re-visit any legacy businesses and apply the same criteria to assess their performance and viability.
Risk sits at the heart of decisions, going beyond the financial to consider the social and reputational risks that can also be high for families. Building wind farms or housing developments on the periphery of landed estates can be very contentious even if there are also wider environmental or social benefits.
Estates focus on ESG
Increasingly, many large landowners are thinking about the social and environmental impact through community projects such as the creation of bio-diverse habitats. Covid has accelerated this thinking and reinforced the value of outdoor exercise so it is likely we will see more countryside opened for wider benefit.
These examples cannot be measured in financial terms alone but are an important part of the legacy that landed families can leave to a wider future generation.
About Diane Seymour-Williams
Diane Seymour-Williams is a founding partner of Acorn Capital Advisers, an independent adviser to family offices and families. Her executive career in investment management included roles as CIO, CEO and portfolio manager. Diane also sits on the Investment Committees of Newnham College Cambridge and the Canal & River Trust.
About The Lede
This article was originally published in The Lede, Transmission Private’s monthly newsletter that tracks the future of reputation management. Featuring interviews with leading private client advisers from the worlds of law, finance, and accountancy, sign up today to receive the newsletter in your inbox every month.