2 Summary of key findings
3 Breakdown of respondents
5 Asset allocation
8 Investment returns
12 Socially responsible investing
14 Alternative investments
14 Hedge funds
16 Stewardship of assets
18 Trustee Board composition
01 JPMorgan Asset Management Charity Survey 2006
It gives me great pleasure to present the 2006 JPMorgan Asset Management
Charity Investment Industry Survey. The survey, which is now in its sixth
year, continues to be widely recognised as an essential guide to investment
changes and trends among the UK’s leading charities.
The survey continues to attract a high number of organisations, with over
100 charities from across the UK providing comments for this year’s report.
This represents over £11 billion of charity assets, which is less than in 2005,
but ahead of the total value of assets in 2004. As a result of the continued
high level of responses, the survey continues to provide valuable insights into
the developments in the charity industry, the products that are currently
being used and the performance and service levels that charities demand.
As in 2005, the findings of the survey cover the current approach of charities
to managing assets, the level of charity investment in each major asset class,
attitudes among charities towards risk and the level of returns they expect in
the future. We also introduced two new topics in the survey in 2006, with
questions on charities attitude to socially responsible investing and the
composition of their Trustee Board. By including these new questions, we
sought to gain even deeper insight into the current thinking of charities.
We would like to thank all those who took part for their contribution to the
survey’s continued success.
Head of UK Charities
02 JPMorgan Asset Management Charity Survey 2006
Summary of Charities remain optimistic about the future, but are more cautious. 40% of charities expect
key findings returns over the next three to five years to be 8% or more. However, many organisations are
maintaining a diversified portfolio (45% of those who changed asset allocation did so in order to
increase portfolio diversification), with large allocations into equities and property as well as an
increased allocation into absolute return strategies such as hedge funds.
Heightened risk awareness has tempered confidence slightly. 80% of charities expect
returns to meet future requirements and commitments of their charity, down from 90% in 2005.
In addition, 48% of those who changed their asset allocation over the last year did so to control
Charities were net buyers of most asset classes, except UK bonds. Of those respondents who
changed their asset allocation, charities were net buyers of most asset classes, with the notable
exception of UK bonds, where organisations were net sellers of the asset class for the second year
in a row. Charities also remain enthusiastic about alternative investments, with no charity
reducing their exposure to hedge funds or private equity.
Use of investment consultants continues to decline. Only 19% of charities stated that they used
consultants for their manager reviews. This is down from the 2005 and 2004 surveys where 23%
and 30% of charities respectively used investment consultants.
Socially responsible investing is not high on charities’ agenda. Over half of charities (58%)
stated that they do not have socially responsible/ethical constraints when investing, which is a
similar response level to when the question was previously asked in 2003.
Charities understand the benefits and value of hedge funds. 62% of respondents stated that
hedge fund returns had met or exceeded expectations and 81% responded that hedge fund
investments are good value for money. This is up from 72% in 2005.
Please note, wherever mentioned, survey data for 2006 covers the period 30 September 2005 to 30 September 2006 and survey data for
2005 covers the 12 months to 30 September 2005.
03 JPMorgan Asset Management Charity Survey 2006
Breakdown of In order to make it as easy as possible for respondents, charities had the option of submitting their
respondents responses either in hard copy format or via the internet. We received 102 responses to the survey,
which is slightly down from the record number we received in 2005 but enough to ensure that we
gained useful and interesting insights from the survey.
The value of charities’ assets under management varied even more widely than in 2005, with
responses coming from across the asset range, from under £1 million to £5 billion. This ensured
that we continued to gauge the views of charities across the sector. The total assets under
management of all respondents was over £11.5 billion, less than in 2005, but up from the total
value of respondents in 2004.
Breakdown of respondents by assets under management (GBP million)
■ Under 5
■ 5 - 10
17% 24% ■ 11 - 20
■ 21 - 49
■ 50 - 99
16% ■ Not disclosed
As in 2005, over two thirds of charities (78%) saw their assets grow in 2006. The returns, however,
were more evenly spread, with only a few charities seeing their assets grow by 21% or more. More
charities (12%) experienced a loss than in 2005. Some charity portfolios were perhaps caught out
by the sharp dip in equity markets in the middle of May to June 2006.
Looking in detail at how much charity assets have grown in the last two years compared to
previous years, 66% of respondents saw their capital grow by a handsome 21% or more between
2004 and 2006. This compares to 51% over 2003-2005 and 23% in 2002 to 2004.
These results are not surprising given that equity market performance has been very strong over
the past two years, with the MSCI World rising 29.1% over the two years to December 2006, and
registering a gain of 24.5% between 2003 and 2005.
All in all, most charities seemed to have had a good year of returns in 2006 – a feature that has
contributed to charities continued optimism about the future.
04 JPMorgan Asset Management Charity Survey 2006
Percentage change in investment returns in past two years
13 ■ 2001-2003
-21% or less 7 ■ 2002-2004
8 ■ 2003-2005
-11% to -20%
Investment return in the past two years
-1% to -10% 2
No change 9
1% to 10% 7
11% to 20% 24
21% or more 51
0% 10% 20% 30% 40% 50% 60% 70%
Use of investment managers
When asked how many investment managers they use to manage their assets, 18% of charities still
manage their assets in-house, which is slightly up from 2005 when 17% of charities managed
When employing external investment managers, the majority of respondents still only use a few
managers irrespective of whether their assets were being managed on a pooled or segregated basis.
However, fewer charities in 2006 stated they used one or two managers compared to 2005. More
specifically, 40% responded that they used only one manager and 20% said they used two in 2006,
while it was 47% and 21% respectively in 2005. Only 6% stated that they employed more than five
Average AUM of charities that use external managers 2006 (£m) 2005 (£m)
No managers used 10.6 14.7
1-3 managers used 69.6 158.6
4 or more managers used 700.9 590.4
In order to discover which charities are most likely to use external managers, we examined the
assets under management for the charities that responded. As in 2005’s survey, we found that in
general the larger the charity, the more likely they are to outsource their asset management and
use multiple managers. The average value of assets for charities with no managers was £10.6
million, while those who used four or more managers had an average of almost £700.9 million,
which is more than 10 times the value of assets of those using one to three managers and 70 times
of those using no managers.
05 JPMorgan Asset Management Charity Survey 2006
Asset allocation Incidence of charities in each asset class
84 82 ■ 2004
80 76 75 75 73
42 42 44
11 11 13 16
te ds r
s / ert
uit ers es bo ers ds
Ca sits op Pr uity fun Ot
eq Ov uiti UK Ov bon Pr ge
UK o eq He
As the chart above shows, UK equities are still the most popular asset class amongst charities and
have been for the past three years as we would expect. UK bonds also remain popular, with 61% of
respondents investing in them, as are cash deposits, with 70% of organisations investing in them.
However, all three of these main asset classes have experienced a drop in their popularity, generally
in favour of property and hedge funds. Allocations made to overseas bonds and equities have also
fallen away slightly, following the trend seen in 2005.
As stated earlier, hedge funds and property (although a lower allocation than two years ago) were
the only asset classes to see some growth in terms of the number of charities that were investing in
them. More specifically, nearly half of charities (42%) invest in property and 20% in hedge funds.
We can conclude from these results that charities seem to be sensibly maintaining a diversified
portfolio, spreading their risks across multiple asset classes, including traditional and alternative
investments. This highlights the ongoing theme of the 2006 survey that, although charities are
optimistic about the future, they are still cautious enough to want to reduce the volatility of their
portfolios and spread their risk across different assets.
When considering the asset allocation of charities that saw their assets under management rise, fall
or stay the same, the survey found that the most successful charities had a greater allocation to
property, UK equities and overseas equities – asset classes that performed well in 2006.
Those that suffered a decrease in assets under management had a heavier allocation into cash.
Hedge funds were also prevalent with charities that experienced losses, highlighting the
importance for charities of picking a good hedge fund manager.
For those charities that saw their assets under management remain unchanged, their allocation
was quite evenly spread across asset classes, suggesting that poorly performing asset classes
cancelled out gains from better performing ones.
The table below shows the average AUM of those charities investing in property, private equity
and hedge funds:
Asset class Number of respondents Average AUM £m
Property 33 281
Private Equity 9 653
Hedge funds 16 177
06 JPMorgan Asset Management Charity Survey 2006
As the chart on the previous page shows, property and hedge funds seem to be the most accessible
alternative investments for charities. Approximately a third of charities investing in hedge funds or
property had assets under management below £50 million. Only one charity who invested in
private equity fell into this category.
Bringing in the earlier finding that more charities seem to invest in hedge funds and property than
private equity, this perhaps reflects that there is a lack of suitable investment vehicles for smaller
charities to invest in private equity. There are common investment funds providing access to hedge
funds and property, but not private equity.
Incidence of charities by management style for UK equity
■ % Response 2006
■ % Response 2005
10 6 4
d d ent % t
en % en
ge ce 2
na ) an em to em 4 em re
ma ing E nh anag .5% ag % to ag mo
ly rack 0 ) an 2 ) an or
ive x t x m rk + um em k+ m m % )
Ind hma r an
n tiv ar nu ive +4
Pa (inde Ac chm r an ss rk num
nc pe en pe gre hma r an
(be (b Ag nc pe
When considering the returns that charities target from their investment into UK equities, the
majority of respondents (69%) are targeting a return of 2% or less through enhanced index
management or passive management. Only 41% are pursuing active management with a return
target of between 2% and 4%, which is in sharp contrast to the 2005 survey, where 65% of
respondents stated that they are pursuing active management in UK equities. This again ties in
with the overriding theme of the survey that charities are still optimistic about the future, but are
more cautious than in 2005.
Supporting this theme is the fact that only 6% of charities are using an aggressive style of
management and targeting excess returns of 4% or more.
Changes to asset allocation in the last 12 months
Yes 29% 29%
No 71% 71%
Charities remain quite satisfied with their asset allocation, with the majority of charities (71%)
not making major changes within the previous 12 months. There has been no change year-on-year
to the number of charities making asset allocation changes.
07 JPMorgan Asset Management Charity Survey 2006
Changes to asset allocation for those charities making asset allocation changes
Hedge funds 3
Private Equity 9
34 Net change – 2006
17 Net change – 2005
Cash 14 Net change – 2004
-40% -20% 0% 20% 40% 60% 80% 100% 120%
For those charities that made asset allocation changes, the only asset class to see a significant decrease in
allocation was bonds, which saw a 20% drop in allocation in 2006 compared to a drop of 12% in 2005.
The asset classes that have seen the largest change in asset allocation are hedge funds and private
equity, which saw a 100% net increase in charities that changed their asset allocation investing in
them. Property also saw a significant increase in asset allocation, with a net change in allocation of
+34%. Equities and cash were also beneficiaries of the asset allocation changes.
We can draw several conclusions from these results. Firstly, the pursuit of absolute returns as
opposed to relative returns seems to be clear from the large increase in allocation to hedge funds
that charities have pursued. With charities a little more cautious than in 2005, making positive
absolute returns seems to be more important to them than the pursuit of relative returns.
Tied to this and some of the findings we have seen earlier in the survey is the fact that charities have
increased their allocation across virtually all asset classes. They seem to be much more focused on
ensuring that they have sufficient diversification in their portfolio and are concentrating on
controlling risk. This is in contrast to 2005 where charities were more interested in pursuing returns.
Reasons for changing asset allocation
50 48 ■ 2006
45 46 ■ 2005
g g se f f / in r
hin llin isk y o ts se s he
atc o tro t r rea n o ilit rea urn ge
an l Ot
nc tio n e
inc e ret
r m ets t on men o i fica es i lat mark ch eral nt
se s s
C t T i s Vo ty To nc A ov e
Clo f as ilitie es ers las lio ui ha tm
o inv div set c ortfo eq en es gy
s ep inv trate
When considering the reasons for changing asset allocation, the majority of charities changed
their exposure in order to control investment risk and to increase diversification within their
portfolio. This is in contrast to 2005, where the top reason for respondents to change allocation
was to increase/enhance returns.
These findings are further evidence that charities are more cautious than in 2005. Controlling
investment risk and increasing diversification were not so important in 2005, but have moved to
the top of charities’ agenda in 2006. However, given that 38% of organisations changed allocation
to enhance returns, charities remain optimistic.
08 JPMorgan Asset Management Charity Survey 2006
Best definition of ‘investment risk’
Investment managers not
meeting their return target
over and above benchmark
Not generating enough Market volatility
income return 48%
Capital growth not
meeting inflation over
the long term
As expected, by far the most popular definition of investment risk was ‘market volatility’. This is
possibly because the survey was conducted quite soon after the spike in volatility in May and June
2006 during which charities’ concerns over market volatility re-emerged. This is consistent with
the fact that charities made asset allocation changes in 2006 to increase diversification and
therefore reduce portfolio volatility.
returns Methods used to measure overall performance in your entire portfolio
74 74 ■ 2006
70 67 ■ 2005
55 ■ 2003
20 18 18
2 3 3
t t t st on r
ins ins ins ain iti he
ga ga n ga ag pet Ot
s a et
n k s ns a latio n s a ies ns com
tur r ark tur nf tur ilit tur /
Re ma chm Re sh/i Re liab Re oup
e n ca gr
When considering how investment returns are measured, the majority of charities (67%) prefer to
measure returns against market set benchmarks. This figure has dropped slightly from 74% in
2005 and 2004 in favour of measuring returns against cash/inflation and peer group/competition.
After several years of steady decline, the number of charities measuring returns against peer
groups/competition seems to have stabilised in 2006.
Actual absolute return of portfolio over the last 12 months
10 5 4
s % -7% re
les -5% -6 -8
or 4% 5% 6% 7% or
09 JPMorgan Asset Management Charity Survey 2006
When asked to specify the level of absolute returns they achieved in 2006, 67% of charities replied
that they received 8% or more. Most of the remaining respondents (28%) saw returns of 5% or
less, which means that charities are either enjoying very decent returns or quite mediocre returns
depending on their asset allocation. Those charities investing heavily into equities and other
potentially high returning asset classes saw their portfolios rise significantly.
Annual percentage rate of return expected over next 3-5 years (entire portfolio)
Where changes were ■ 2006 they were made as follows:
16 16 16
14 15 14 15
s % % % % re
les -5 -6 -7 -8 mo
or 4% 5% 6% 7% or
In terms of expected returns over the medium to long term, the survey results show confidence in
the future continues to rise. 40% of charities expect to earn 8% or more, which is up from 2005
and significantly higher than in 2004 where there was only 9% expecting a return above this level.
This indicates that charities’ optimism about the future continues to improve, with respondents
having a reasonably optimistic outlook for returns over the next three to five years.
Studying the figures further, over half of charities expected a return of 7% or more in 2006. Bringing
in the results from our analysis of the reasons for changing asset allocation on page 7, charities
are more concerned with controlling investment risk than pursuing returns, we can conclude that
although charities expected more in 2006, they are trying to be more realistic. In addition, it is
possible that they have more confidence in their fund managers to add value and deliver returns.
Charities expecting a return of 6% or more continue to be heavily invested in real assets, both
equities and property.
Active excess return
% Respondents ■ <1%
■ 1% – 2%
■ 2% – 3%
■ 3% or more
38% 32% 29%
In terms of expected excess return, the average return expected was 2.0% (compared to 1.8% in
2005), with all responses falling between the range of 0% and 6%. This indicates that charities are
continuing to expect their fund managers to perform for them and in some cases perform very well.
10 JPMorgan Asset Management Charity Survey 2006
Expected return for UK Equities
■ 2005 52
16 15 14
10 9 8
% % % % % re
<4 –5 –6 –7 –8 mo
4% 5% 6% 7% or
When asked about returns on specific asset classes, charities expected higher returns from UK
equities than UK bonds. Expectations on average were for 7.1% per annum for UK equities. Given
the returns seen over the past few years, it is not surprising to see that over half of respondents (52%)
expected UK equities to deliver annualised returns of 8% or more over the next three to five years.
Expected return for UK Bonds
32 ■ 2006
25 23 23
% % % % % re
<4 –5 –6 –7 –8 mo
4% 5% 6% 7% or
As for UK bonds, respondents were more bearish in their return expectations, with all respondents
expecting 7% or less from the asset class, unlike in 2005, where 6% expected 8% or more. This
more cautious return expectation probably reflects the disappointing overall returns from bonds
over the last few years.
Year-on-year, for those charities expecting 6% or more from UK equities, they have increased their
allocation to UK equities in pursuit of these higher returns.
Annual income required to meet objectives
13% ■ 0%
20% ■ >0% – 3%
■ 3% – 4%
■ 4% – 5%
■ 5 or more
11 JPMorgan Asset Management Charity Survey 2006
When asked to specify the income returns charities have seen over the last twelve months, the
results revealed that the average income return was 3.5%, compared with 4.0% in 2005.
The median result was 3.2%.
Over a third of respondents required an income of 3% or more to meet objectives, with an
average income return requirement per year coming in at 3.1%. This compares to an average
figure of 4.1% in 2005.
Meeting future commitments
Yes 80% 90%
No 20% 10%
80% of respondents expected the returns from their investments to meet their future requirements
and commitments of their charity. This figure is down from the 90% found in 2005, which
indicated a fall in confidence in charities’ investment strategy. This is in contrast to charities’
increased confidence in future returns. The decline in bonds last year and the sharp dip in equity
markets in May and June will probably have affected charities’ expectations that returns will meet
commitments going forward.
Solutions to remedy any return shortage
50 ■ 2006
15 15 15
er te th
rom l igh es olu row
n f ita t h egi ay y bs gy eg e
ur ap k a rat it m ilit n a te ur om
ret nd c oo n st hat olat t a stra fut t inc
aw a L r
u gt rv op n e
Dr me Ad etur fic ren
o ret ptin ate cri ur
inc ce re
Sa for c
ac to g
Of the charities that were expecting returns to not meet commitments, the most popular strategy
to remedy the situation was drawing return from income and capital. This has seen a steady
growth in popularity from 30% in 2004 to 46% in 2006. Conversely, absolute return strategies
(hedge funds) have waned in popularity, with 35% of respondents in 2004 looking to adopt such a
strategy, whilst no respondents cited this as a solution in 2006.
12 JPMorgan Asset Management Charity Survey 2006
Socially responsible Socially responsible investing (SRI) is a topic that we investigated a few years ago and return to in
investing this year’s survey to discover if there have been any changes to charities’ attitude towards SRI.
Incidence of socially responsible and ethical constraints
Expected return will meet charitable commitments
Indicating that charities’ attitude towards SRI or ethical investing has not changed over the past
three years, the majority of respondents (58%) do not have socially responsible/ethical remits when
Applying these principles to fund management
The traditional approach of negative screening is 10 times more popular than the modern method
of positive screening, with 91% of charities favouring this approach.
The sectors charities avoid the most when investing were, as expected, tobacco (68% avoidance),
arms (34% avoidance), alcohol (18% avoidance) and gambling (16% avoidance).
Index for measuring returns against SRI benchmark
The majority of charities that replied to this question said that they did not measure against an SRI
benchmark, while only one charity mentioned using an SRI benchmark, but did not specify the
Incidence of use of an external research screening company
5% ■ Yes
Only one in 20 charities used external screening companies, which ties in with the finding that they
prefer to use negative screening.
13 JPMorgan Asset Management Charity Survey 2006
Plans to introduce new ethical or socially responsible investment policy
■ No, not at the moment
■ Yes, within the next 12 months
■ Yes, but no fixed time frame
Having left the topic out of our survey in the last two years, it seems that charities’ attitudes
towards socially responsible investing have not really changed. The issue remains an area of focus
for a minority of charities and 81% of respondents currently have no plans to introduce a new
ethical or socially responsible investment policy.
Amount willing to sacrifice in annual returns in order to invest in a SRI
10% ■ 0.5%
The average amount that respondents would be willing to sacrifice in order to invest in a SRI
policy is 0.2%. Among those charities not pursuing an ethical policy, the perceived loss in return is
a major factor in not pursuing this policy.
However, amongst ethical charity investors, there is a body of opinion that suggests that an ethical
policy should not require any return sacrifice and in fact ought to be return enhancing.
14 JPMorgan Asset Management Charity Survey 2006
Alternative Attitude towards alternative investment vehicles
investments 2006 2005 2004
Asset class Already use Considering Already use Considering Already use Considering
Private Equity 17% 22% 15% 11% 19% 25%
Hedge Funds 24% 12% 16% 13% 26% 32%
Long only absolute return
strategies 10% 12% 6% 9% 5% 19%
Commodities 3% 13% 3% 5% 9% 6%
Property 41% 24% 45% 12% 56% 28%
When considering alternative investments, property (UK) was the most commonly used asset
class, with 41% of respondents already actively investing in it which is broadly unchanged from
2005. Of particular note, diversification into property (overseas) seems to be of greater interest to
charities, with 26% of organisations considering using it in the future.
Elsewhere in alternative assets, the popularity of hedge funds and long only strategies continues to build,
with both asset classes seeing considerable increases in charities using these strategies year-on-year.
Hedge funds The year started investing in hedge funds
99 00 01 02 03 04 05 06
19 20 20 20 20 20 20 20
Turning specifically to hedge funds, of the 24% of respondents who already invest in hedge funds,
the vast majority began doing so within the last five years, with only 5% of respondents beginning
their investment before 2002. The hedge fund phenomenon seemed to take off from 2002 (a time
when equity markets were approaching their nadir), with take up of the asset class fairly evenly
spread over the next few years. Their popularity has continued over the last two years, with over a
third investing in 2005 and 2006.
Reason for investing in hedge funds
■ Recommendation from
■ Recommendation from
■ Recommendation from
Trustee or Board
15 JPMorgan Asset Management Charity Survey 2006
When investing in hedge funds, 52% of respondents invested as a result of a recommendation
from an investment consultant or company, which indicated the high influence of advisers when
considering alternative asset classes. Almost half of charities acted as a result of an internal
recommendation from a trustee or board, which is a sharp increase on 2005’s finding. These
figures suggest trustees are becoming more confident about taking the decision independently to
invest in hedge funds.
Returns achieved from hedge funds
8% ■ Less than 5% 20%
17% ■ 5% – 7.5%
■ 7.5% – 10%
■ More than 10%
The majority of respondents experienced higher returns from hedge funds in 2006 compared to
2005, with only 8% stating that they had received less than 5% in 2006 compared to 40% of
respondents in 2005. Three-quarters of respondents experienced returns between 5 and 10%, with
the majority falling in the upper half of this range. A not insignificant proportion (17%) of
respondents saw even higher growth, replying that their hedge fund portfolio had returned in
excess of 10%. The average return achieved was 8.4%, compared with 7.5% in 2005.
Satisfaction with returns from hedge funds
18% ■ Returns 29%
38% have exceeded 24%
have not met
A smaller number of charities (18%) compared to last year indicated that returns from their
hedge fund exposure had exceeded expectations. Just under half (44%) stated that they had met
expectations, indicating that the majority are satisfied, but a significant 38% indicated that returns
had not met expectations. This suggests that a growing number of charities are underwhelmed by
the returns received from hedge funds. In the year to September 2006, the average hedge fund
return was 5.2% to 5.5%, according to leading recognised industry benchmarks.
Overwhelmingly respondents continued to regard their investments as good value for money,
with 81% of respondents believing hedge funds are good value, up from 72% the previous year.
This suggests that charities invested in hedge funds are fully aware of the costs associated with
them and why they should be included in a portfolio. Education around hedge funds has been
improving, helping charities understand the asset class and what it has to offer.
16 JPMorgan Asset Management Charity Survey 2006
Stewardship of Last formal investment manager review
38 ■ 2004
t e e
as ree fiv fiv
el s th to an
th nth to ee th go
hin e mo ne o hr go re rs a
Wi elv n o rs ag nt a Mo yea
ee a ee rs
tw etw ye tw yea
Turning to charities’ stewardship of assets, two thirds of respondents (69%) had carried out a
formal review of their investment managers within the last three years, with only 12% having not
done so more than five years ago. The responses are similar to our survey in 2005 and 2004, which
implies that most charities are carrying out their management review according to a regular
Use of consultant for review
2006 2005 2004
Yes 19% 23% 30%
No 81% 77% 70%
The prevalence of consultants in the review process has continued to drop, with less than a fifth
(19%) of charities using them in 2006 compared to 23% in 2005 and 30% in 2004. This suggests
that as returns from their portfolio have been increasingly positive, charities remain optimistic
about the future, and are becoming more relaxed about consulting advisers, preferring to review
internally instead. In addition, given returns have been relatively satisfying, charities could be
more reluctant to make changes and spend money making those changes.
Reason for using a consultant
Where they use consultants, charities seem to be using them for the right reasons. As in previous
years, respondents overwhelmingly cited the requirement of investment advice and the need for
assistance in making objective comparisons of investment strategies as grounds for using
Influence of consultant on choice of managers
Where consultants were used as part of the manager review process, most charities (88%)
responded that they had a moderate or significant influence on their decisions. So, when
consultants are used, charities generally try to take into account what they say and make decisions
17 JPMorgan Asset Management Charity Survey 2006
Next planned investment manager review
■ In the next twelve months
■ Between one to two years
■ Between two to three years
11% ■ Between three to five years
■ More than five years
With regards to the next planned formal review, over half of respondents plan to have a formal
review in the next two years. Only 15% expected their next review to be more than three years away.
Future intentions to use investment consultant
06 05 04
20 20 20
Reflecting the decline in the use of consultants, 81% of respondents are less likely to use a
consultant than in previous years during their manager review. This is an increase on the results
from 2005 and 2004, where 72% and 44% stated that they were not going to use consultants.
Reasons for not using a consultant
g ot e h
ard sin n du ug r ow
Bo nt se f u es it or ot no n he el
ee ficie erti t o ts do enef g f nd n t e atio ants Ot ee b
st f p s n
wi a to rs No orm ult
Tru s su t ex Co tan e b s
l th vie ce g e inf ons as
ha men su Re ligen ectin nag le
t on stify
c u i xp ma on
es j d e e
Of the reasons given for not using the services of an investment consultant, over half (57%) replied that
the board now has sufficient investment expertise to make their own decisions. The second most popular
response highlighted that the cost of using consultants would not justify the benefits of using one.
18 JPMorgan Asset Management Charity Survey 2006
Trustee Board The survey found that the average number of trustees per Trustee Board was 15 with the average
composition length of tenure for trustees being 6.3 years. The majority of charities (62%) have an investment
sub-committee, although the evidence from our survey indicates little correlation between having
a sub-committee and returns achieved.
Sufficient investment expertise on the Trustee Board
The majority of respondents (71%) were confident that their Trustee Boards have sufficient
expertise. The evidence from the survey suggests that this confidence is well founded.
Sufficient demographic diversification on the Trustee Board
There is a fairly even split among charities in terms of whether they think their Trustee Board is
diversified enough across age, gender and ethnic mix. Just over half (54%) believe that their Board
is appropriately diversified.
19 JPMorgan Asset Management Charity Survey 2006
Adequate key charity representation on the Board
Charities are more confident about whether the key representatives of the charity are adequately
represented, with 82% of respondents stating that they are well represented.
General Key concerns about successfully managing charity assets over the next 3-5 years
t e t sk g ty s
en om rke nce /ri ern tin et er ou
stm s Inc Ma rma ity onc lec ss op et ane
ve turn til oc Se ect a ion Pr ark ell
In re rfo la N rr at m sc
pe Vo co lloc Mi
Finally, to ensure we had a full picture of charities’ views, we asked respondents to detail the key
concerns they have about managing their assets over the next three to five years.
In contrast to 2005, where 13% of charities were sufficiently confident to have no concerns, 2006
sees a decline in those organisations with no concerns to 7%. This highlights the ongoing theme
we have seen in this survey that charities are cautiously optimistic in 2006 compared to being
bullish in 2005.
In addition, after a year of more moderate returns than in 2005, charities are again highlighting
investment returns as their key concern in managing their assets over the next 3-5 years. Perhaps
since returns in a broad sweep of asset classes in the six months before the survey was conducted
However, on a more positive note, charities largely feel that they have a suitable asset allocation
strategy for the next three to five years, with only 7% citing this as a concern in the latest survey.
Also, charities are generally less concerned about market performance or income, again perhaps
highlighting a level of tempered optimism.
20 JPMorgan Asset Management Charity Survey 2006
Conclusion From the survey, we can draw some key themes from the charities’ responses, many of which
continued the trends observed in 2005, but also some that offered different views from those seen
The key theme of the 2006 survey is that charities have remained relatively optimistic, but are
acting with some caution. In 2005, the survey results revealed that charities were willing to take on
risk and were much more bullish about the future than in 2004, perhaps because they were
anchoring on the strong returns they had seen from their portfolios and income over the previous
two and a half years.
In 2006, charities indicated that they were still quite optimistic, but have tempered their
confidence and are thinking more about controlling risk than the aggressive pursuit of returns.
The sharp correction seen in equity markets during May 2006 has perhaps caused charities to be
more realistic and aware that markets can change direction suddenly.
Tied in with this theme is the finding that charities are increasingly concentrating on maintaining
a diversified portfolio. In particular, they continue to increase their exposure to alternative
investments. Property still remains a very popular choice amongst charities and features as one of
the main asset classes in charity portfolios alongside UK equities and UK bonds. Of particular
interest is that some organisations are starting to consider diversifying into overseas property.
Charities also continue to increase their exposure to absolute return strategies, which is
appropriate given their higher risk aversion. Hedge funds are particularly popular amongst
charities, with many stating that returns from their allocation into the asset class has met or
exceeded expectations and overwhelmingly that they represent good value for money.
An ongoing theme from 2005 is the decline in the popularity of investment consultants. With
charities remaining relatively positive about the future and feeling generally satisfied by the returns
they have seen, many organisations are comfortable with their current asset allocation and
investment managers, so do not feel they need the advice of consultants. They are also increasingly
comfortable with making decisions independently, as illustrated by the confidence they show in
their own Trustee Boards.
Turning to charities attitudes towards socially responsible investing, a topic that we touched on in
2003 and re-introduced this year, charities’ stance on ethical policies does not seem to have
changed. Over half of respondents indicated that they do not have socially responsible constraints
when investing and 81% of charities stated they are not planning to introduce an ethical policy in
In summary, charities continued to be generally happy with their investments and returns they
are earning. They are still looking to the future with confidence, but with more caution than seen
JPMorgan Asset Management is one of the five largest
active asset managers in the world. We manage assets of more than
£1.3 billion for more than 300 UK charity clients.
Globally, JPMorgan manages charitable assets of more than
£7 billion – a responsibility that gives us clear insight into what
charities want from their asset manager.
We combine disciplined processes with team-based decision-making
and rigorous risk control. Our focus on innovative thinking means
we are constantly finding new ways to capture sources of
investment return across financial markets.
JPMorgan Asset Management is part of JPMorgan Chase & Co,
the global financial services group.
For further information contact Katie Delacombe in our Charities Team on
020 7742 5307 or by email at firstname.lastname@example.org
JPMorgan Asset Management
20 Finsbury Street
London EC2Y 9AQ
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