Charity investors are going to have to come to terms with  the 'new normal' of lower GDP growth rates, in a future which will feel less exciting but which will be more sustainable.

That was the top-level message delivered to several hundred trustees this morning at the Cazenove annual charity investment seminar by chief investment officer, Richard Jeffrey.

UK GDP growth rates, he predicted, were likely to settle at "a bit less than 2 per cent" in the next few years. "We won't be going back to pre-2008 growth any time soon", he said, because the 'old normal' of strong GDP growth was based on unsustainable borrowing.  

But Jeffrey was upbeat when assessing global recovery trends. He thought that UK growth may well exceed forecasts and reach 1.25 or even 1.5 per cent this year. In the US his prediction was that "after a lot of political wrangling" the fiscal-cliff problem will be resolved without too much adverse impact on US growth rates.

In Europe, Jeffrey believes that "problems will be kept under wraps for the next 12-18 months", but the debt crisis "will come back to haunt the eurozone". And on inflation, his view was that this is unlikely to emerge as a problem in world economies in 2013, "although liquidity being added through quantitative easing could prove inflationary in the years ahead".

His positive assessment of prospects for the UK economy was driven by Jeffrey's belief that the Office for National Statistics will continue to revise upwards its assessment of growth in 2012: "It could end up near to 1 per cent", he suggested. "That's a long way from the triple-dip recession the newspapers love to write about."

In other presentations, Peter Harvey, head of credit, emphasised that the single greatest challenge for western economies is reducing levels of public sector debt. Put simply, that means "spending less on schools, hospitals and social security".

But the positive overall message from the seminar was summed up by Julie Dean, manager of the Cazenove UK Opportunities Fund, who said "there is now a firmer undertone to markets than there has been for some time".

Cazenove has £18.2bn of funds under management, of which £3.4bn is managed on behalf of charity clients.

 

 

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