The WM Company- no owned by State Street – says UK charity funds posted an average return of 2.4 percent in the third quarter. Returns for the year to date have risen to nearly 5 percent, while the three-year annualised return is up to 3.2 percent, above the 2.5 percent per annum rise in inflation over the same period.
“The positive Q3 returns will come as a breath of fresh air to charity funds in the UK,” says George Urquhart, a consultant at The WM Company. “In particular, the three-year return is now back in positive territory for the first time since the beginning of 2002, which should begin to ease the worries of many charities.”
UK equities rallied strongly during August and September to post a return for the quarter of 2.9 percent. Non-UK equity returns were slightly negative overall, with excellent returns in the Pacific Rim (10 percent) and Emerging Markets (8.5 percent) not quite offsetting losses in North America (-1.1 percent) and more significantly Japan (-7.6 percent). The strength of the Euro, which appreciated by over 2 percent, helped European equities post a small positive return of 0.7 percent. UK conventional and Index Linked government bonds each produced returns around 3 percent, while corporate bond returns were slightly higher, at 3.5 percent. Property had another solid quarter, with a return of 3.9 percent.
Charity Funds constrained with an income requirement produced a slightly higher average return of 2.6 percent. This group of charities has a higher commitment to bond investment at the expense of overseas equities. Owing to its greater representation in overseas equity investment, Charity Funds with an unconstrained mandate had a lower return of 2.3 percent.