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2021/22 Financial Review
Investments
The Trustees take a long-term view of investment
returns, which is the basis for the investment strategy
agreed with Rathbones (the Charity’s investment
advisers and managers).
Investment strategy
Our investment objective is to generate a consistent
and sustainable return from our investment portfolio
to finance spending on grants and running costs,
whilst maintaining the purchasing power of the
underlying investments over the long term and
subject to the appropriate balance of risk.
In delivering this objective, we seek to strike a balance
between:
● Our ethical stance, which is to not take any
direct holdings in tobacco and ensure, through
monitoring, that there are no concentrations of
holdings in other sectors that are in conflict with
the Charity’s objectives;
● Minimising risk by diversification and maximising
returns; and
● Ensuring the fees charged by fund managers are
competitive and provide value for money.
In 2020/21, the Trustees commenced a review of the
Charity’s investment policy with a view to aligning it
more closely with the Charity’s objectives. This was
planned to involve a change in the ethical stance and a
move towards incorporating Environmental, Social, and
Governance (“ESG”) principles within the investment
policy. The outcome of this review was delayed due
to there being sector wide discussions on the matter
in relation to new guidance being developed by the
Charity Commission and a case being decided in the
High Court aimed at clarifying the extent to which
charity trustees may allow their objectives to influence
their investment policy. This case was concluded in
April 2022 and the internal review will be resumed with
any policy changes expected to be implemented during
2022/23.
The Finance, Audit and Investment Committee (FAIC)
regularly reviews the allocation and composition of
the investment portfolio to ensure that it remains
appropriate for the commitments and future funding
expectations of the Charity.
The strategy continues to use targeted asset allocation
ranges in order to balance return and volatility. The
targeted range for each asset category, excluding
cash, has been as follows:
● 40-80% in UK and Overseas Equities, invested either
directly or through funds selected for the portfolio
by Rathbones;
● 0-30% in Fixed Interest; and
● 0-20% in Diversifier investment funds (property,
infrastructure and absolute return funds).
These allocation ranges are for guidance and the
allocations have remained within these ranges
throughout the year; any movement outside these
ranges would trigger a review. Any proposal to invest
in alternative asset classes or otherwise materially
change the profile of the portfolio would require Board
approval, on receipt of appropriate professional advice.
In addition, the Charity holds funds required for
working capital and to fund grant commitments due
within the next twelve months in the L&G sterling
liquidity fund and with Rathbones.
Investment performance
During the year, the Charity’s investments generated
interest and dividends of £0.5m (2020/21: £0.7m) and
there was a net overall gain in the value of the listed
investment portfolio of £1.4m, following gains in
2020/21 of £5.2m, a year of rapid recovery after the
turmoil experienced in world markets at the start
of the COVID-19 pandemic in 2019/20. Additionally,
in 2020/21, the gains included a £0.3m gain on the
Charity’s social investment, which was sold during
2020/21.
The FAIC monitors investment performance at every
quarterly meeting. In assessing the investment
performance, the Trustees have set a performance
target to exceed a return equivalent to 4% above Retail
Price Inflation (RPI) over the long term. In addition,
at each meeting, Trustees review the performance
of the fund compared to benchmark indices for each
major asset class and in total relative to the weighted
composite benchmark index. When measured over the
period since the current strategy was fully operational
up to 31 March 2022, the performance of the fund was,
in overall terms, higher than the composite benchmark
index and also significantly exceeded the target of 4%
above RPI.
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