Comparing statistics in a Covid-19 world

Many charities will have received investment reports recently, outlining the impact of the Covid-19 pandemic on their endowment portfolio. Despite the shocking impact the virus has inflicted globally, thanks to the coordinated response of central banks to do literally ‘whatever it takes’ to save economies, companies (to a lesser extent, charities) and jobs, the overall effect has not been as bad as some would expect.

An average return from multi-asset charitable pooled funds, as measured by Charity Intelligence, shows a decline of -12.4% for the current year to 31 March. If we extend this to mid-May, the year-to-date return is roughly -6% and for the past 12 months many funds are at break even. Phew!

Only a few assets appreciated, such as government bonds and gold, which are typical safe havens at a time of stress. This demonstrates the benefit of diversification, spreading the risk by investing into a range of assets which most investment managers are correct and keen to promote. 

Amid this chaos, why investment managers continue to highlight their multi-asset fund performance against an equity index is beyond us. They will typically say their fund has declined less than the UK Stock Market (FTSE All Share index). Considering many charity funds have a 20-30% exposure to UK companies, this is like comparing apples and oranges.

Charities often have an investment objective or target to grow their endowment in line with a real measure such as Consumer Prices Index inflation. While equities are a good hedge against rising inflation, it is not a good benchmark to compare against a portfolio of a diversified assets. 

At Yoke, we spend time with charities to help them understand the key issues for investing and demystify the jargon. Please contact us if you are looking for simple answers during a difficult time.