KCHC-AR-2023 Final Signed - Flipbook - Page 44
2022/23 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 2022/23, the Trustees reviewed the Charity’s
investment policy with a view to aligning it more closely
with the Charity’s purpose and objectives. This involves
a change in the ethical stance and a move towards
incorporating Environmental, Social, and Governance
(“ESG”) principles within the investment policy. The
policy changes are expected to be implemented during
2023/24.
In delivering this objective, we seek to strike a balance
between:
• Maintaining our own ethical stance, which is to not
take any direct holdings in tobacco, alcohol, sugar,
gambling, fossil fuel, adult entertainment, illegal
weapons and predatory lending;
• Ensuring we only invest in organisations with their
own ethical stance;
• Avoiding concentrations of holdings in other sectors
that are in conflict with the Charity’s objectives
• Minimising risk by diversification and maximising
returns;
• Ensuring the fees charged by fund managers are
competitive and provide value for money.
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
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S U P P O R T K I N G S .O R G .U K
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 £0.7m (2021/22: £0.5m)
and there was a net overall deficit in the value of the
listed investment portfolio of £2.3m, following gains
in 2021/22 of £1.4m, reflecting a year of volatility
experienced in world markets.
The Finance Committee monitors investment
performance at every quarterly meeting. In assessing
the investment performance, the Trustees have set a
performance target to exceed a total return equivalent
to 3.5% above Consumer Price Inflation (CPI) 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. The
portfolio produced a total return over the 12-month
period to the end of March 2023 of -6.2% versus the
composite index benchmark (which changed in October
2022), which returned -3.3%. Over three years to the
end of March 2023, the portfolio produced a total return
of +33.2% versus the composite index benchmark,
which returned +27.6%.
