FINANCE NEWS: Chiswell advises to stick with equities for long-term returns

Mathew Little

A "buy and hold" strategy remains the most viable option for charity investors despite a "third year of market misery", fund manager Chiswell Associates has claimed.

Speaking at the launch of Chiswell's annual Compendium of Stock Market Investment for Charities, managing director Robert Brown said: "Post-war history is unambiguously on the side of the long-term investor."

The compendium argues that returns gained in the past 40 years on UK equity investment occurred in just 26 months of full market investment and to benefit from that investors had to be in for the long haul.

The current downturn is due primarily to a correction of the valuation excesses of the bull market of the 1990s and has little correlation to the strength of the real economy.

"Shares represent a stake in the long-term growth of the economy and over time the growth rate enjoyed by a diversified portfolio of equities will tend to converge with that of the economy as a whole," writes Brown in the book.

But the compendium warns that the spectre of deflation could reverse the traditional outperformance of equities compared to gilts.

"If the West goes the way of Japan - and there are some disturbing parallels - then the whole basis of traditional, equity-orientated charity investment will be undermined," says the compendium.

Chiswell also questions the suitability of venture capital or private equity as an alternative asset class for charities in the current bear market.

"Of all the alternative investment possibilities open to charities, venture capital is unusually difficult to access, unusually illiquid, unusually opaque and unusually risky," it says.

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