Results announced last week by WM Performance Services show that charity investment funds posted their best returns for a decade in 2005.
Charities gained 4.6 per cent in the final quarter, to end the year with a positive score of just over 20 per cent.
Charities have seen their investments grow by 56.9 per cent in the past three years, and have now repaired the damage caused by the three-year stock market slump.
In that period, 38 per cent was wiped from the value of charities' capital.
Many of them, including famous names such as the RSPCA and the RNIB, were forced to make redundancies, and grant-making foundations slashed their budgets. But three years later, that deficit has been erased.
"Charity funds have been vindicated for their commitment to equities, and returns over the past three years have more than offset the negative years to 2002," said Michael Walsh, managing director at WM. "Over the past three years, which is the most typical performance assessment period, charity fund returns are now in significantly positive territory."
According to Investec Asset Management, a charity that invested £100 on 1 January 2000 would now have approximately £113.
"Those charities that held their nerve and stuck with equities have now got their money back," said John Hildebrand, head of charities at Investec.
"This highlights both the volatility inherent in equity markets and the likelihood of them performing well in the long term."
But David Membrey, acting chief executive of the Charity Finance Directors' Group, reacted to the figures with caution. "It is clear that results are improving, but it is a bit early to say that we are completely out of the woods," he said. "Although this is good news for grant-makers, and therefore for grant recipients, I think this is unlikely to lead to a sudden loosening of belts. It is likely that any increased funds will be allocated to making up for earlier losses or pension deficits."
Equity investment around the world performed well for charities, with the highest returns to be found in Japan and emerging markets at close to 40 per cent.