Equities are set for three to five years of solid, if not spectacular, growth, a leading investment manager told delegates at the Charities Aid Foundation annual conference last week.
In a debate on the merits of equities compared with property for charity investors, Andrew Hutton, head of investment management at the Coutts Group, predicted a rate of return of 7.5 per cent for equities over the next 10 years. This is more than 5 per cent above the rate of inflation.
But he said there would be no return to the double-digit returns of the late 1990s. "We don't know what the stock market is going to do, but the building blocks are there for growth in the next three to five years and now is not the time to be bailing out," he said.
Hutton said that stock market increases happen in short bursts - shares have risen 20 per cent in the past four weeks for example - and in order to benefit charities have to invest for the long term.
He said that equities were the cheapest they had been for two generations, unless you believe that the economy is set for a downturn similar to the 1930s' depression. In that case, neither equities nor property were a good bet, and charities should invest in government bonds.
Presenting the case for property, Nigel Bennett, property fund manager at Deutsche Asset Management, conceded that the capital growth on commercial property - based on rent increases - has been slowing in the past two years and next year would probably be negative.
However, this was compensated by income from property which was holding steady, yielding a total return of around 7 per cent. "It is not the stellar return which we have seen at certain times from equities, but is a decent form of return," he said.