FINANCE NEWS: Upturn in equities relieves funds

Charity investments posted a positive annual return last year for the first time since 1999, according to figures from the WM Company.

The average charity fund rose in value by 17.5 per cent in 2003, says the firm, which measures the performance of just under 300 funds.

WM consultant George Urquhart said: "2003 was an excellent year for charity funds and will have gone some way to relieve the pressures on them. Hopefully, the continuing recovery in equity in 2004 will provide ongoing relief."

However, the average charity return for the three-year period up to December 2003 is still negative at around -4 per cent a year. Preliminary results for the final quarter of 2003 show that charities maintained their strong recent performance on the stock market, recording a return of just below 7 per cent.

Charity investments in all equity markets produced double-digit returns in 2003. The highest returns - up to 30 per cent - were in the Pacific Rim and mainland Europe. UK equities returned 21 per cent, Japan rose by 19 per cent and North America by 15 per cent. In contrast, bonds and cash produced returns of 3-7 per cent.

Property, a growing asset class for charity investors, recorded another strong performance in 2003 with 10 per cent growth.

WM's figures also show that charities maintain a high level of exposure to shares in portfolios. Equities make up 75 per cent of the average charity fund.

There was a shift away from international equities, especially North America and Europe, and withdrawals from bonds and cash towards UK equities in 2003.

Richard Brumby, director of charitable funds at Credit Suisse Asset Management, said the average charity now needed to recoup the losses incurred in 2001 and 2000 before recovering the losses sustained in 1999's downturn.

"Trustees will be relieved that the income earned on endowments in this period has not been as volatile as the capital values of their investments," he added.

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