Investments in the WM Charity Fund Universe, worth around £9bn in total, returned an average of 11 per cent in 2012, according to new figures.
State Street Investment Analytics has this week released the preliminary results for the performance of its 270 funds in the WM Charity Fund Universe, which suggest that 2012 was a much better year for charity investments than 2011, when the overall average return was -3 per cent.
Despite stubbornly low global growth and the ever-present Eurozone sovereign debt crisis last year, charity funds were buoyed by a strong performance in UK equities, which is the single biggest component of the majority of charity funds. These equities returned 13 per cent over the year, outperforming the benchmark FTSE All Share index for the second year running.
European equities were the best performer, returning 18 per cent, while Japanese stocks and shares delivered a comparatively lower 5 per cent.
David Cullinan, head of performance consultation at State Street, told civilsociety.co.uk that 2012 was characterised by a “big bounce back” for the charity investment world, after the “very, very tough year” of 2011.
The year provided three quarters of positive returns, with only the second quarter (April to June) recording negative returns, of around -1.3 per cent.
Cullinan said the positive year meant that rolling returns on an annualised basis averaged 7 per cent per annum for the last three years; 3 per cent for the last five years, and a “pretty healthy” 8 per cent over the last ten years.
Charities have been rewarded because they tend to invest in riskier assets such as equities, which have tended to outperform safer assets such as long-dated UK government bonds, which returned just 3 per cent over the year.
Cullinan added: “Returns from alternative strategies varied, but were positive as was the total return on property, where healthy yields succeeded in offsetting the impact of falling values.”
Asset Risk Consultants average returns 9.6 per cent
The WM figures for 2012 would appear to be corroborated by the latest data from Asset Risk Consultants. Daniel Hurdley, head of ARC’s research team, said: “Our figures would seem to agree for a growth or equity-focused portfolio, which is where most of the CIF funds would be invested.”
Returns for ARC’s funds for 2012 are expected to be as follows – though quarter four figures are still estimates: ARC Cautious Charity Index - 6.3 per cent; ARC Balanced Asset Charity Index - 8.8 per cent; ARC Steady Growth Charity Index - 10.7 per cent; ARC Equity Risk Charity Index - 12.6 per cent. The overall average is 9.6 per cent.
