Charity Investment Spotlight report June 2015_Layout 1 03/07/ :16 Page 1 Sponsored by

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2 Contents Introduction Key findings Top investment managers (by numbers of clients) The sector s investment fund values Notable charity performances Methodology and Feedback 1

3 Introduction Barclays Wealth and Investment Management are delighted to sponsor this Spotlight Investment Report. Benchmarking is a pivotal component of charity investment management and whilst this report focuses on the top end of the market, it also highlights various underlying investment trends and statistics which are relevant for all charities with investments. Following another year of accommodative monetary policy and buoyant equity markets, performance for those charities with long term endowments portfolios and a material allocation to risk assets has been higher than the long run average. That said, it should also be recognised that many charities simply don t have the time horizon or free cash flow to invest in long term portfolios, and the prolonged period of low interest rates has been extremely challenging for these charities. This disparity and investment dynamic is set to change over the coming years as interest rates normalise and the conundrum facing trustees is one of positioning how do we ensure that our portfolio is optimised for a rising interest rate environment? At Barclays, we fundamentally believe that the answer to this question is flexibility and innovation. The flexibility to dynamically adjust your asset allocation and the innovation to create solutions which are bespoke to the investment requirements of charities. To this end, we have seen a large increase in the number of charities being more institutional in their investment approach by investing in conservative structured notes, such as those which undertake to repay full capital at maturity; whether that is to hedge their existing equity positions or generate a stable return in excess of cash. This culture of innovation & forward thinking is something we pride ourselves on at Barclays and is why we were so delighted to be awarded the Charity Investment Team of the Year at the European Wealth Briefing 2015 Awards for driving innovation in the charity investment market. Charity investment management is an increasingly important component of our offering in the UK; it is both an excellent complement to our investment offering in the education & local authority sectors and in perfect alignment with our overarching commitment to the Barclays Citizenship Agenda. Please click on this link to our charity page for more information: Mark Brown Director Phone: + 44 (0) / + 44 (0) mark.s.brown@barclays.com Please be aware that Investments can fall in value and investors may get back less than they invested. 2

4 Charity Investment Spotlight It s all change at the top in this second annual Charity Investment Spotlight. Our data shows that Cazenove is now the most popular manager for the investment portfolios of the top 5,000 largest charities, as a consequence of its merger with Schroders. Furthermore, last year s leader Investec is now down to fifth despite increasing its total number of clients, following big increases at Rathbones, CCLA and Sarasin and Partners. Meanwhile: l The top 5,000 charities investment assets have increased in value for the fifth successive year, up by 11.9% to 87.2bn; l The Garfield Weston Foundation experienced the largest investment asset value increase thanks to the performance of its shareholdings in Wittington Investments, which is the owner of Associated British Foods among others; l The largest decrease in investment asset value was at the Gatsby Charitable Foundation, after trustees decided to transfer some 100m into cash. About the report This report examines the investment performance of the top 5,000 UK charities and their investment managers over the last five years. It is designed to reveal how charities assets are performing and who advises on them. Whether you are looking to benchmark your investment performance against other charities, or research fund managers with expertise in the sector, the Spotlight is an essential source of information. 3

5 Popular investment managers Cazenove now has the most clients in the top 5,000 This year s report sees significant change in the manager rankings, with Cazenove taking over as the most popular following its merger with Schroders. In our report last year, Schroders and Cazenove held seventh and eighth position with 113 and 112 of the top 5,000 charities respectively as clients. Figure 1: The most popular fund managers The manager with the most clients in our previous report was Investec, but it has now fallen to fifth position despite gaining five clients in the past year. This is because Rathbones, CCLA and Sarasin & Partners added 13, 7 and 9 clients respectively. 4

6 Investec nevertheless continues to manage the largest total amount of investment funds, with 6.61bn, although it holds this position primarily because it works with the Garfield Weston Foundation, which has over 10.5bn in fixed asset investments. Investec did, however, also have the largest new client win, joining a host of other managers to work on the Health Foundation s 687.2m portfolio. Figure 2: Largest manager appointments A total of 268 firms act as investment managers to the top 5,000 charities. Some 3,207 of these charities have investments, and not all of them have sufficient funds to require a manager only 2,434 of the top 5,000 charities therefore have an investment manager. 5

7 The sector s investment fund values Asset values up 11.9% in 2014 This year has seen further impressive growth in the top 5,000 charities investment assets, up this time by 11.9% to 87.2bn (from this point on the report focuses on fixed assets excluding property, referred to simply as investment assets ). This is the fifth consecutive annual growth and follows a 12.0% growth the previous year. Figure 3: Value of fixed asset investments (excluding property) The fund sizes of the charities in our sample range from just 1,000 at several charities to the 17.1bn held by the Wellcome Trust. Figure 4 shows the spread of investment values for the 3,207 charities with investment assets. 6

8 Figure 4: Investment assets, in bands Charity Investment Spotlight The 36 largest charity portfolios each have assets over 210m. These are collectively worth 49.5bn (up from 45.4bn a year ago), and represent 57% of our sample s total asset value. Meanwhile, half of the charities included in this report have investment assets worth less than 5m, and 85% of them have investment assets worth less than 20m. Figure 5 shows how the number of charities with assets larger than 210m has grown by 5.9%, and as a result this category s investment income has grown by 4.4%. Meanwhile, the number of charities with less than 5m assets has fallen by 3.6%, with investment income falling by a similar proportion 3.1%. 7

9 Figure 5: Investment assets over time Charity Investment Spotlight In their most recent accounts, three-quarters of the 3,207 charities increased the value of their investments compared to the previous year (figure 5). Just over a fifth saw a decrease. Figure 6: Asset value increases and decreases 8

10 Notable charity performances Garfield Weston Foundation saw largest fund increase for the second year running The charities which witnessed the greatest change in investment fund value in their most recent accounts are listed in figure 7. Like last year, Garfield Weston Foundation heads the list with 10.5bn, the majority of which is comprised of its 79% share in Wittington Investments, the holding company that owns Associated British Foods plc, Fortnum & Mason plc and Heal Holdings Limited. The Foundation s report confirms that the companies it owns had performed well and increased their dividends in the past year. Another notable performance comes from Cancer Research UK, which has seen its fund value rise by 66%. This came following investment of proceeds from the sale of the charity s 80m research laboratory in London. Figure 7: Largest asset value increases Charity Financial subscribers can click any of the charities listed in the table above for more details, including the firms advising them and the length of those relationships. 9

11 Of the increases in this table, four of these were managed by Cazenove and four by Newton. BlackRock, Ruffer, Sarasin and Partners and Veritas each managed three. Figure 8 looks at those charities which saw the greatest percentage increase in asset value. This generally identifies charities that are in the beginning stages of creating an investment portfolio, and this time M&R Gross Charities heads the list via a 50% stake in Saxton Estates Limited, a property investment company. Figure 8: Largest percentage increases in asset value Figure 9 shows the largest decreases in asset value experienced by charities. Here the largest was at the Gatsby Charitable Foundation, where more than 100m has been transferred from the fixed asset portfolio into cash at bank and in hand. This relates to the trustees desire to hold cash and near-cash investments that equate to at least three years of grant expenditure, thereby avoiding a forced sale of investments should markets deteriorate. Figure 9: Largest asset value decreases 10

12 Methodology Charity Financials records the names of all the advisers employed to provide services to the top 5,000 charities. These advisers include investment managers, custodians, investment advisers, auditors, banks and legal advisers, as well as any others that are mentioned in each organisation s financial statements. Data, which is collected from financial statements on a rolling annual basis, includes the firms hired by each charity, alongside a comprehensive breakdown of income, expenditure and assets. By recording the names of the advising firms for each charity in each year, we have identified when changes take place, the length of time relationships exist for, and how often charities make changes. Background to the top 5,000 charities To be included in the top 5,000 charities, an organisation must have charitable status and have annual income greater than 1.6m, annual expenditure exceeding 1.56m or have total funds/net assets greater than 3.2m. Only one of these criteria needs to be met. Some organisations are excluded despite having charitable status, namely academies, independent schools, universities and housing associations. Those included in the top 5,000 are a varied group, both in terms of size and activity. Some focus on local services, while others are involved in complex international projects. Others exist solely to provide other organisations with funding. Not all charities have investments, but for those that do, the value of these varies considerably from one organisation to the next. Feedback All feedback is valuable. If you have any suggestions on how to improve this report, or if you just have an opinion (good or bad), please let us know by ing mark.pincher@wilmingtonplc.com or alternatively call The data for the Charity Investment Spotlight was extracted from Charity Financials. Charity Financials is the only fully interactive online database tool containing financial data on over 160,000 UK charities, offering you a complete financial view of UK charities. A subscription to Charity Financials enables you to compare and benchmark your charity against other charities, conduct trends, peer group and sector analysis, and view detailed financial data for the UK s Top 5,000 charities, as well as create dynamic reports in minutes. To request a no-obligation online demonstration today and see how Charity Financials can help your charity, contact: Alex McKenna Tel: Alex.McKenna@Wilmingtonplc.com 2015 Charity Financials, a division of Wilmington Publishing & Information Ltd, part of Wilmington PLC. Wilmington Publishing & Information is a limited company registered in England & Wales. Registered office: 6-14 Underwood Street, London, N1 7JQ. Company Registration number: VAT NO.GB