Finance: Charity returns linked to the City

The Charities Aid Foundation has launched a bank account offering stock market-linked returns to charities.

The CAF Guaranteed Equity Account is a five-year, fixed-term account that will be managed by Bristol & West Structured Products.

It will offer a minimum guaranteed return of 15 per cent over five years without the risk of capital erosion, which stock market investment entails.

No direct share investment takes place as Bristol & West secures returns by utilising financial contracts.

Ron Green, senior manager with CAF Financial Services, said: "Over the past three years, the performance of the stock market has steadily improved.

But many trustees still consider that investments in equities expose their charities' capital to excessive risk.

"With this account, the risk to capital is removed and there is a guaranteed minimum return, should the markets prove disappointing."

Charities can deposit between £2,500 and £10m in the account, but have to apply before 30 April.

The Charities Aid Foundation has also appointed Northern Trust to provide custody, fund administration and transfer agency services to two of its common investment funds, which hold charity assets of £430m.

Tracey Reddings, executive director of CAF Financial Services, said: "Northern Trust has a flexible, consultative approach to addressing our requirements.

"The fact that it can provide us with custody, fund accounting and transfer agency all under one roof is highly attractive."

The decision to appoint an independent custodian is unusual in the charity sector. A 2005 survey by the Charity Fund Partnership found that only 5 per cent of charities appoint an outside custodian, whereas 75 per cent use the custody arrangements chosen by their investment managers.

Jeremy Hester, senior vice president of business development at Northern Trust, said: "This mandate has enabled us to demonstrate that we can provide a range of premium asset servicing solutions to meet the needs of charity sector clients."

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