Focus: Finance and Governance - Outlook - Performance isn't always everything

Kevin Sims, managing director of the Charity Fund Partnership

It is understandable that charities holding investment portfolios inevitably concentrate on the investment performance achieved by their appointed fund managers. But the firm's staff, administration, systems and delivery all play important roles and, depending on their quality, can either add to or detract from the overall relationship.

So how do charities view these areas, and which firms consistently appear to deliver good client service? This is what the Charity Fund Partnership endeavours to determine in its annual survey of charitable funds. This year's findings were based on responses from 189 funds.

We measure service satisfaction on a scale of two (excellent) to minus two (poor). Overall, the aggregate score this year was 1.01, which is up from 0.98 last year and 0.72 in 2003.

The lower scores for satisfaction in the past two years appear to have coincided with higher levels of dissatisfaction with investment performance, perhaps implying that when performance is poor clients tend to be more critical about other areas.

But in 13 per cent of this year's appraisals, charities specifically said the service levels from their investment managers had improved, thus implying a genuine attempt to consider service delivery separately from investment performance.

Although the appraisals represent only a small percentage of the asset managers' client bases, it is possible to glean how respondents rate service satisfaction from specific firms. In the past four years of the study, firms such as Carr Sheppards, CCLA, Chiswell, Gerrard, HSBC, Merrill Lynch and Newton all scored well, although some of these firms have seen fluctuations in their scores during this period.

The survey also looks at how charities rate specific service components. This year's findings showed that staff expertise was rated highest, followed by speed of response and staff continuity. The bottom three were range of products and services, staff proactivity and, with the lowest score, staff innovation.

Curiously, three different firms achieved the highest scores for the top three and a further three different firms achieved the lowest scores for the bottom three. This demonstrates that no one firm has an absolute monopoly on excellent or poor service.

When asked what, aside from investment performance, the respondents considered to be the most important aspect of an investment management firm, "understanding our needs" was most frequently cited.

However, this achieved only the sixth highest mean score, seemingly indicating a mismatch between what charities want and how well their suppliers are perceived to be delivering it.

Finally, it is interesting to note that of the charities reviewing their fund manager appointments, 10 per cent said the reason for this was poor service levels. Although investment performance is undoubtedly a major factor in triggering reviews, this finding alone shows that performance is not everything after all.

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