FINANCE NEWS: Charity investments bounce back

Charity investments have surged in value in the past three months, according to the latest figures from financial performance measurement service WM Company.

The recent stock market rebound helped the total return of charity investment funds rise by an estimated 11 per cent in the second quarter of this year.

It is the highest three-month return for charities since the 13.8 per cent jump in the final quarter of 1998, at the end of the last bull market.

The rise wipes out the drop of 4.2 per cent in the value of funds in the first quarter, leaving a positive return of 6.3 per cent for funds, including property, for 2003 so far.

Charities with large investments in UK equities enjoyed the biggest rise in value, with a growth of 14.5 per cent since the end of March. European equities grew by 20.4 per cent, North American equities by 10.7 per cent and overseas equities as a whole by 12.5 per cent.

John Hildebrand, head of charities at Investec Asset Management, commented: "As most long-term charities are still primarily biased to equities, this has meant that charities will have benefited strongly from this rise.

It also shows the dangers of moving too far from a charity's long-term ideal strategy, as markets can and do move large distances in comparatively short periods of time."

Bonds, which enjoyed positive returns during the equity slide of the past three years, have begun to grow more slowly. UK bonds rose by 1.4 per cent in the second quarter, while overseas bonds posted a negative return of 0.5 per cent.

But Eric Lambert, head of client consultancy with WM, cautioned against a false sense of security: "The sector will take some comfort from positive returns in the calendar quarter to 30 June. Leading asset managers are suggesting equities are good value over the long term, but they are not suggesting this performance signals the end of the bear market."

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