Article last updated 26 September 2025.
At Rathbones, we believe that long-term success is grounded in a simple principle: over time, asset values tend to follow the cash flows they generate. But not all growth is created equal. What matters most is the ability to grow those cash flows efficiently, on a per share basis, without excessive use of capital or dilution.
Cash flow and capital efficiency
Short-term price movements can be distracting, especially during periods of volatility. But price is not the same as value. Over the long run, the value of most assets – whether equities, infrastructure, or property – reflects the income they produce.
That is why we focus on assets with the potential to grow per share earnings, cash flow, and dividends consistently over time. But we also look closely at how that growth is achieved. We favour businesses that grow efficiently, using capital wisely and avoiding unnecessary dilution. These are typically companies with strong competitive positions, high returns on capital, and the ability to reinvest profits at attractive rates.
Inflation
Inflation is a key concern for many charities, particularly those with fixed spending commitments. But inflation is difficult to predict and can be driven by a wide range of factors. Rather than trying to forecast inflation, we encourage charities to build portfolios that are naturally resilient to it.
Certain quality businesses and assets have the ability to often show resilience in various inflationary scenarios. These are not short-term hedges, but long-term growth assets with cash flow profiles that are durable and help protect against the erosion of purchasing power over time. Their ability to maintain pricing power and grow revenues and earnings steadily, even in changing economic conditions, is what makes them valuable in real terms.
Active management
Periods of disruption, whether political, economic, or geopolitical, can create uncertainty. But they also create opportunity. Active management allows us to respond to changing conditions, take advantage of mispriced assets, and improve the quality of portfolios over time. When markets overreact to short-term events, we can use that volatility to invest in high-quality assets at more attractive valuations. These decisions, made consistently over time, help build stronger and more resilient portfolios. Importantly, we focus on businesses that can grow without overextending themselves, balancing ambition with discipline.
Balancing today’s needs with tomorrow’s goals
Charities often need to balance the requirement for income today with the need to grow capital for the future. The right investment strategy blends income-generating assets with long-term growth exposure, tailored to each charity’s objectives and time horizon.
We work with trustees to ensure that portfolios reflect both current financial needs and future ambitions. Reviewing spending rules and investment policies regularly helps ensure that strategies remain aligned with purpose and are adaptable to change.
Purpose, stewardship, and long-term thinking
Investment strategy should reflect more than just financial goals. It should also support a charity’s values and mission. Responsible investment, including the consideration of environmental, social, and governance factors, plays an important role in long-term portfolio design. It helps manage risk and identify sustainable sources of return.
With inflation, interest rates, and regulation all evolving, now is a good time for trustees to review their investment approach. Is the portfolio positioned to grow in real terms? Is it resilient to disruption? Does it reflect the charity’s mission?
At Rathbones, we believe that long-term investing is not just about patience. It is about clarity of purpose, thoughtful decision-making, and the ability to adapt. By focusing on quality, efficiency, and sustainable per share growth, charities can build portfolios that align with their goals, both financially and with respect to their mission and values.
