1. Investment Update Ian Burrows, Head of Charities (Midlands)
Roger Sedgwick, Divisional Director (Charities)
9th June 2017

2. AGENDA
Collaborative Procurement
Collaborative Engagement
Real Income

3. Collaborative Procurement
Ian Burrows, Head of Charities (Midlands)

4. Collaborative Procurement
Common with Religious Charities but could it work for Grant-makers?
Information Sharing
Joint Beauty Parade
Combined Investment Committee/ Common Portfolio

5. Collaborative Procurement - Why
Oversight
Economies of Scale

6. Collaborative Procurement – Why Not
Compromises are never perfect
Lose control of your assets?
Potential for disagreement

7. Collaborative Procurement - Considerations
How to find the right partner?
Drafting an Investment Committee Terms of Reference
Drafting a common Investment Policy Statement
Ensuring Communication with Trustees

8. Collaborative Engagement
Ian Burrows, Head of Charities (Midlands)

9. Charity Commission Guidance
CC14: Charities & Investment Matters states…
Trustees of any charity can decide to invest ethically, even if the investment might provide a lower rate of return than an alternative investment.
Ethical investment means investing in a way that reflects a charity’s values and ethos and does not run counter to its aims.
However, a charity’s trustees must be able to justify why it is in the charity’s best interests to invest in this way.
The law permits the following reasons:
a particular investment conflicts with the aims of the charity
the charity might lose supporters or beneficiaries if it does not invest ethically
there is no significant financial detriment

10. Divestment

11. Divestment Moral Argument:
Charities exist for the public good. Their investments should reflect their values and beliefs.
Divesting from companies can drive down share prices or restrict access to debt thereby increasing the cost of capital.
Media attention around such campaigns can create a stigma than can be equally of not more powerful
Investment Argument:
Stranded Assets Theory
Research suggests that if the world is to prevent global temperatures rising by more than 2% then a significant proportion of reserves can never be burnt making them essentially worthless

12. Engagement
In 2008, TV chef Hugh Fearnley-Whittingstall tabled a special resolution at the Tesco AGM calling for the firm to stop selling intensively farmed chickens. The resolution was defeated after he received less than 10% of votes BUT…

13. Real Income
Roger Sedgwick, Divisional Director (Charities)

14. How sources of income have changed over time
* Bank of America Merrill Lynch Investment Grade Sterling Corporate Index
Source: Bloomberg, Brewin Dolphin, Bank of America Merrill Lynch, as at February 2017
Past performance is not an indication of future performance. Performance is shown before charges which will have the effect of reducing the performance illustrated. Any investment mentioned is for illustrative purposes only and is not intended as investment advice. The value of investments and any income from them can fall and you may get back less than you invested.

15. The impact of inflation on ‘real’ value of cash
The above is for illustrative purposes only to inform on potential risk return characteristics of potential assets based on past historic returns and is no guide to future risk or performance. Performance is shown before fees which will have the effect of reducing the performance illustrated.

16. Opportunities in Fixed Interest markets
What can we do to protect capital in a rising interest rate environment?
Fixed to Floating Rate Bonds
Floating Rate Notes
High Yield Bonds
Overseas Bonds

17. FTSE All Share – dividends more stable than share prices
Source: Thomson Reuters DataStream. Assumption: The capital and income returns if £1000 was invested in 1994
The value of investments can fall and you may get back less than you invested. The above information is for illustrative purposes only and is not intended as investment advice. Past performance is not a guide to future performance. Performance is shown before charges which will have the effect of reducing the performance illustrated.

18. Dividend yield vs dividend growth

19. What about Property?

20. An Alternative view
Alternative assets are anything that is not a traditional asset (equities, bonds, property, cash)
Infrastructure & Renewable Energy funds typically offer attractive income yields
The above information is for illustrative purposes only and is not intended as investment advice.

21. Current risk and return considerations
Equities
Risk
Balanced Portfolio
Bonds
Return
Cash
The above is for illustrative purposes only to inform on potential risk return characteristics of potential assets based on past historic returns and is no guide to future risk or performance. Performance is shown before fees which will have the effect of reducing the performance illustrated.

22. Current income yields (%)
Income vs Inflation
Current income yields (%)
Inflation (%)
Cash
0.25
RPI
3.5
10-year gilts
1.09
CPI
2.7
FTSE All Share
3.50
Estimate*
2.4
Property
3.56
Infrastructure/Renewables
5.11
*Estimate for the next 10 years. Inflation figures as at April 2017; Source: Office of National Statistics. Property yield from FTSE Real Estate Investment Trusts. Infrastucture/Renewables yield from average of 13 funds.
The above is for illustrative purposes only to inform on potential income return characteristics of potential assets based on past historic returns and is no guide to future risk or performance.

23. Suitability of asset classes over time
Long-term investor
Short-term investor
50 years
20 years
3 years
1 year
Cash
Gilts/Government Bonds
Corporate Bonds
UK equities
Overseas equities
Property
Alternatives
Source: Brewin Dolphin
represents greater suitability
The above information is for illustrative purposes only and is not intended as investment advice.

24. Historic long-term total returns (after inflation)
Real total investment returns by asset class (% p.a.)
2016
10 years
20 years
50 years
91 years *
Equities
10.4
4.6
5.4
5.7
6.6
Gilts
-0.6
4.9
3.3
2.6
Corporate bonds
7.0
4.1
Index-linked
8.7
5.0
Cash
-1.8
-1.1
-0.03
0.8
0.5
Source: Barclays | Equity Gilt Study 2017
Past performance is not a guide to future performance. Performance is shown before charges which will have the effect of reducing the performance illustrated.
* Entire sample. Source: Centre for Research into Security Prices (CRSP), Barclays Research

25. Risk warning
This presentation is intended for attendees of the CTWM Seminar - Charity Governance, Finance and Investment only and should not be distributed in whole or in part to any third party.
The value of investments and any income from them can fall and you may get back less than you invested. No investment is suitable in all cases. If you are unsure about the suitability of a particular investment please contact us for advice
Past performance is not a guide to future performance. The value of investments can fall and you may get back less than you invested.
The information contained in this presentation has been taken from public sources and is believed to be reliable and accurate but, without further investigations, cannot be warranted as to accuracy or completeness. The opinions expressed in this document are not necessarily the views held by Brewin Dolphin Ltd. No Director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document.
We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at
Restricted Advice
Whilst Brewin Dolphin looks across a wide range of financial products and services in order to meet your needs and objectives, we will not review all retail investment products in the market. As such we offer a ‘Restricted Advice’ service.