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Charities concerned about performance and focused on risk  


Two in five (41%) of UK charities are concerned about their performance over the next 12 months and as a result, are focusing on risk when managing their investment portfolio, according to a study by Heartwood Investment Management.

Indeed, two thirds (62%) of charities believe risk is the most relevant metric when managing an investment portfolio, while a third (33%) cited return and just 7% stated it was yield.
The study by Heartwood looked at charities from across the UK with an average annual income of more than GBP4 million that mainly support causes in the health and education sectors, and receive funding predominately through private donations and investment income. On average the charities surveyed have GBP28 million in investable assets.
The research showed that more than two in three (69%) charities target an inflation plus return for their investments with 38% targeting a combination of market indices. Three quarters use a markets based benchmark to compare investment performance and just under half (44%) of charities said they use an absolute based benchmark.
Despite current global economic uncertainty, charities continue to invest in equities to deliver effective market returns. Over four-fifths (81%) of charity portfolios said they were invested in equities, with bonds and property equal second (56%).
Guy Davies, Head of Charities at Heartwood Investment Management, says: “Our research shows that charities are concerned about their performance, but that they are also very much focussed on the level of risk required to achieve inflation plus returns. It is notable therefore, that despite increasing levels of economic uncertainty, the majority of the charities sector remains allocated to equities. This underlines their long-term investment horizon.” 
Heartwood’s research also showed that charities were evenly split (41%) when asked whether they would prefer investing with a larger or smaller/boutique firm. A third (33%) of charities said they review their investment manager’s services at least once a year and a substantial 94% suggested they hear from their investment manager at least once a quarter. Respondents suggested their preferred type of communication for regular investment updates were through written postal reports and email.
Davies, says: “The research supports Heartwood’s risk based proposition which aims to provide a combination of high quality and disciplined investment management process and a unique relationship based service. To meet the needs of charities, our Endowment strategy aims to produce superior long-term capital gains, while Heartwood Inflation strategy is designed to protect the real value of capital and income over time.”
For more than 20 years, Heartwood has earned a reputation among charity trustees and their advisers for delivering reliable, prudent investment management. The firm has been recognised for its strong ethos of personal service on which the business was founded. Indeed, several members of the senior management team have pro bono roles as trustees or advisers to major charities and as a result, have a deep understanding of charities’ requirements.
For the second year in a row, Heartwood was won the Investment Performance Award for Cautious Portfolios and shortlisted for Defensive and Growth Portfolio categories in the 2015 PAM Awards.  This is a recognition of Heartwood’s risk adjusted investment returns as measured by Asset Risk Consultants

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