Finance News: Charities cautious on returns despite steady growthin assets

Charities are planning for modest investment returns over the next few years despite the recent stock market resurgence, according to a new poll.

But they are also becoming less conservative in their investment strategies, looking to alternative assets such as property and hedge funds and reducing their reliance on shares.

The annual JP Morgan Fleming Asset Management sector survey has found that charities expect an average return of 6 per cent over the next three to five years.

This is despite WM Company figures that show respective average returns of more than 11 per cent and 17 per cent in 2003 and 2004.

Jeremy Wells, head of charities investment at JP Morgan Fleming, said: "Return expectations among charity investors have been adversely affected by the stock market returns in the first part of this decade, with many becoming overly cautious when predicting future returns."

Charities' wariness when it comes to the future of their investments is not simply academic - predictions will influence spending plans for the coming years.

However, the survey did uncover good news for the current state of charity investments.

Seventy-seven per cent of respondents reported that their assets had increased over the past 12 months, whereas only 23 per cent noted a decline.

The majority saw their assets grow by between 1 and 10 per cent.

Despite modest predictions, the poll revealed that charities are becoming more adventurous when deciding how to invest. For the first time, more charities prefer pooled funds to segregated management - 34 per cent to 28 per cent. They are also reallocating to alternative assets - 44 per cent said they had property investments, and 16 per cent said they had bought into hedge funds. Meanwhile, 56 per cent had reduced their exposure to equities.

"Charities are taking a proactive approach," said Wells. "Belts are being tightened and alternative investments are becoming more prominent on a charity's radar as a source of enhanced returns. Pooled funds are becoming increasingly popular as a way of cutting costs and investing in a wider range of investment strategies."

Most charities said they find it harder to raise funds than they did five years ago. But 10 per cent said they find it easier, compared with 1 per cent two years ago.

JP Morgan interviewed 110 organisations with assets of more than £11.1 bn.

FACT FILE

A JP Morgan Fleming Asset Management survey has found that charities are expecting average investment returns of 6 per cent over the next three to five years

This is despite figures of 17 per cent for 2005 and 11 per cent for 2004

77 per cent of respondents reported asset growth over the past 12 months

More charities prefer pooled funds to segregated management: 34 per cent against 28 per cent

44 per cent of charities have property investments.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Follow us on:
  • Facebook
  • LinkedIn
  • Twitter
  • Google +

Latest Jobs

RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners

Markel

Expert Hub

Insurance advice from Markel

Guide: What insurance does your charity need?

Guide: What insurance does your charity need?

Partner Content: Presented By Markel

Third Sector Logo

Get our bulletins. Read more articles. Join a growing community of Third Sector professionals

Register now