State Street has announced the results of its UK Charity Fund Universe for 2009, with estimates for the WM UK Charity Fund Universe suggesting charity trustees will enjoy returns of around 19 percent.

"In isolation, it was a stellar year for risk assets, both equity and corporate bonds, while the safe havens of cash and government bonds languished," said Jeanette Patrizio, vice president of State Street Investment Analytics.

"However, the returns in the latest year represent only partial recovery of the significant investment losses that were rooted in the collapse of the credit market and the sharp economic recession it precipitated."

UK equities, strategically the largest component of the majority of funds, bounced from a low point in March to return 30% for the year.

This was in line with the FTSE All Share index. International equities, which now make up just under 30% of the average fund, had mixed results for the UK investor. The Pacific region (excluding Japan) and the emerging markets gained 50% and 55% over the year, with North America and Continental Europe returning 17% and 19%, respectively. Japan returned -6%.

Currency was a major feature of the international returns, as Sterling strengthened by around 9% against the euro, 12% against the US dollar and 15% against the Japanese yen.

Bond returns reflected a returning risk appetite. Government bonds generally showed modest declines, such as UK Government bonds for example, which fell 1% over the year.

Corporates staged a strong recovery as the yield gap closed and returned around 11%. UK Index Linked bonds returned 8% as fears of deflation receded.

Amongst the alternative strategies, hedge funds returned 10% overall, although returns varied widely.

Other strategies were negative. Property values continued to decline with a return of -2% for the year.

The vast majority of charitable funds are run against strategic asset allocations designed to meet specific long-term investment return and investment risk criteria.

These strategies will define the individual fund outcomes for 2009. Pension funds that have a long time horizon, strong employer covenant or are open to new members will generally have benefited from high equity content in 2009, as will most charity funds.

While funds generally disinvested from equities over the year, the equity weight increased due to the relative strength of markets.

Additionally, money was withdrawn from bonds and invested primarily in 'alternative' asset classes with private equity and hedge funds the main recipients.

Share Story: