Investors urged to broaden performance benchmarks

Charities should measure the success of their investments against the entire market, say experts

Third sector fund managers are increasingly measuring their performance against the entire market rather than comparing themselves only to other charity funds, according to senior charity investment specialists.

Ruth Murphy, director of business development for charities at Newton Investment Management, said her company's clients were more interested in how investments performed against the market as a whole.

"We provide a service where we pick the stocks, and our clients want to see that we're beating a typical selection," she told Third Sector. "A lot of our clients still like to check they aren't a million miles away from their peer group, but it's very much a secondary measure."

She said her company had stopped supplying data to the WM Charity Fund Monitor, a principal source of quarterly data on the rates of return of charity investments.

Andrew Pitt, head of charities at UBS Wealth Management, said it was questionable whether charities should be benchmarking against other charities.

"WM benchmarking was very popular with our clients a few years ago, but it's tailing off now as a preferred measure," he said. "However, to say it's complete rubbish and should be scrapped is going too far."

John Kelly, head of client investments at fund management firm CCLA, said it was also moving away from peer group benchmarking.

He said that CCLA often made up a large proportion of the benchmark by itself, which made it difficult to make a useful comparison.

David Cullinan, head of performance consultancy at State Street, which provides WM's services, said it should be used alongside benchmarks specific to individual charities.

"Charities shouldn't benchmark only against each other or the market," he said. "They should make sure they are meeting their long-term objectives."


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