UK Charity Funds Performance Has Declined, Says WM Performance Services

WM Performance Services, the European performance measurement division of State Street, has released its preliminary UK Charity Fund results for the second quarter of 2006. According to the survey, charity funds suffered during the second quarter, falling 2.6 percent on

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WM Performance Services, the European performance measurement division of State Street, has released its preliminary UK Charity Fund results for the second quarter of 2006.

According to the survey, charity funds suffered during the second quarter, falling 2.6 percent on account of falling global equity market values. However, for the year to date, the average charity fund has still gained 3.8 percent, and for the last 12 months the average return is 16.4 percent. The return for the last three years, the most typical performance assessment period, is 15.3 percent per annum and represents a real return (i.e. return in excess of retail price inflation) in the last three years of around 12 percent per annum for the average charity.

“Following 12 consecutive quarters of positive returns, it was inevitable that Charity Funds would eventually experience a reversal of fortune,” says Michael Walsh, managing director at WM Performance Services. “Although concerns over inflation and US interest rates triggered a correction in world equity markets, Charity Funds are still well placed at the halfway stage for a good 2006.”

During the quarter, equity returns were negative in all major regions, with the worst declines suffered in Japan (-10.4 percent) and Emerging Markets (-8.8 percent). North America fell by 1.3 percent in local currency terms, but a weak dollar resulted in a fall of 7.5 percent for the sterling investor. UK Equities fell by 1.8 percent, while Continental Europe declined by 4.5 percent.

Bonds, UK Government, corporate and index linked all fell around 1 percent during the quarter. Cash and Property posted positive returns of and 4.4 percent, respectively.

There was a small difference in performance for the quarter between charity funds constrained by an income requirement and those which have no such constraints: funds with an income constraint benefited from their higher commitment to Bonds at the expense of Overseas Equities. However, very little difference is reflected over the 12-month and three-year periods.

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