| Charities keen on Myners principles, laissez-faire on shareholder activism |
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| 03/01/2003 | |
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A number of leading UK charities believe that the principles laid down in the Myners report are equally applicable to charities with investment portfolios. 2001's Myners report on institutional investment was concerned mainly with the investment decisions of the pension and insurance fund industry, however a survey of 170 funds held by some of the UK's biggest charities – with total assets in excess of £12bn – reveals that many of the guidelines laid down in the Myners report are seen by charities as equally applicable to their sector. According to the 2003 Survey of Charitable, Educational, Endowment and other Funds report published this week by The Charity Fund Partnership, around three quarters of respondents feel the area of the Myners report covering clear fund objectives, effective decision making, performance measurement, transparency and providing explicit mandates "were very or fairly applicable to charities". Shareholders' backseat The principle thought to be least applicable to this sector is the guideline on shareholder activism. Almost one quarter of respondents (23 per cent) admit that they never vote at company AGMs and less than half (47 per cent) of the charitable funds in the research say they take into account socially responsible, ethical or environmental investment issues. Kevin Sims, managing director of the Charity Fund Partnership said: "The majority of funds in this survey leave voting decisions entirely to their investment managers and very few funds actually give voting guidelines to their managers. This is in stark contrast to the position seen in the pensions sector, where corporate governance responsibilities are really taking hold". The meaning of style In terms of investment style, very few funds in the survey said they adopted passive/index management and just 14 per cent of funds worth over £25m followed this investment route. Only 28 per cent of funds said they were "dissatisfied" or "strongly dissatisfied" with the investment performance achieved over the last year. Over half (52 per cent) of respondents said they were "very satisfied" or "reasonably satisfied" with their investment performance under the circumstances. "It would appear that many funds, whilst having experienced a downturn in their portfolio valuations, recognise things could have been a lot worse. The low incidence of use of index fund management may have helped in this regard," said Kevin Sims. By far the biggest risk concern to the respondents, stated by almost two thirds of funds (61 per cent), is the risk of generating insufficient income from the investment portfolio. Around four in ten are also concerned about stock risk - one or more individual asset underperforming - and sector risk - one or more investment categories underperforming. And worryingly, the survey also revealed that 20 per cent of respondents admitted to not knowing who acts as custodian of their assets. Taken together, these respondents represent assets of around £108m, "a not inconsiderable sum," noted Sims. This e-mail address is being protected from spam bots, you need JavaScript enabled to view it |
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