The value of investments and any income from them can fall and you may get back less than you invested.

Looking Back and Looking Ahead for Charity Investors


Philip Young looks at post-crisis charity investing.

Whilst there are many good reasons to invest for the long term, two in particular stand out.

The first is that the longer we own global equities, the less volatile they become. The second is that staying invested in the market over the long term generates better total returns. Fortunately, for most of our charity clients, the long term is at least ten years, if not many decades longer.

Over 20 years, equities are almost less volatile than both gilts and cash. Between 2002 and 2017, having been through a bull market, the financial crash, a bear market and then another bull market, an investor would have made an overall 9.9% annual return. If you had been out of the market for the best ten days, the returns would have been halved; if an investor had missed the best 20 days, the return would fall to 2.1%. Had an investor missed the best 30 days, the return would have been negative. Therefore, we need to participate as owners of long-term assets.


The current yield on the UK equity market as measured by the FTSE All Share Index is c. 3.9%; we expect dividends from our UK portfolios to grow by c. 4% over the next 12 months, compared to the current level of the RPI of 3.2%. These are attractive numbers for our charity clients in terms of generating reliable income streams higher than bonds and keeping ahead of inflation.


Given the high level of returns that we have seen from equities since the Global Financial Crisis, we have already started to de-risk our charity portfolios, as we expect levels of volatility to rise; we have been taking profits and starting to move out of risk assets such as US equities into less volatile investments such as government bonds and absolute return investments. We have also been shortening duration and improving credit quality within our bond portfolios.


Although the US has been providing many of the best IT sector gains of late, China has some big players in Alibaba, Tencent and Baidu. We are actively looking to invest in these and other stocks within the appropriate investment vehicles for our charity clients to capture their long-term growth potential, particularly at the current depressed levels.


New IT-driven growth themes are difficult to identify early on; therefore, a diversified approach in a technology fund or a specialist artificial intelligence or robotics pooled investment vehicle is probably the best way to approach investing in these areas. Healthcare is another specialist sector where we believe there is the potential to achieve above-average returns if one is patient and adopts a well-diversified approach.

The value of investments can fall and you may get back less than you invested. Past performance is not a guide to future performance. The information in this article is believed to be correct but without further investigation cannot be warranted as to its accuracy or completeness. The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.