UK equity funds managed by M&G and Barings, and property funds managed by CCLA, lead the way in the results table for the 38 Common Investment Funds authorised by the Charity Commission.
Common Investment Funds, registered charities permitted by law since the 1960 Charities Act, now hold assets worth £10bn. They are pooled funds which enable small- and medium-sized charities to invest in the markets.
The best performing Common Investment Fund for 2004 was M&G's Charifund, a charitable unit trust, which netted a total return of 20.2 per cent.
UK Growth and Income Fund from Baring Asset Management also had a strong year, posting 17.1 per cent. The FTSE All-Share returned 12.9 per cent.
Property also did well. CCLA's Church of England Property Fund recorded 17.4 per cent and the same firm's COIF Charities Property Fund was close behind on 16.8 per cent.
Both M&G's and Baring's funds are based on high yielding equity strategies, unlike many competitors which follow a FTSE benchmark that includes low-dividend companies.
Richard Hughes, manager of Charifund, said: "High-yielding equities are a good way of beating the market over the long term. We have adopted that strategy for 44 years and we have beaten the market average by 2.5 per cent over that period. But there are periods when it does not work and when growth comes back into vogue."
But the WM figures also demonstrate the wild fluctuations that Common Investment Funds can be subject to. Schroder's Charity Equity Fund, the top performing UK equity fund in 2003, slumped to last place in 2004, posting a return of 10.7 per cent.
Alpha Charity, a mixed fund run by Sarasin, also had a poor year with a total return of 5.1 per cent.
Professor Paul Palmer, of the Centre for Charity Effectiveness at City University, said the results showed that Common Investment Funds should not be considered by larger charities. "They are cheap and useful for the smaller end of the market," he said.
"But for charities that have larger funds they are not appropriate. They don't make use of fund managers who actively manage and make strategic asset allocation decisions to add value."