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Investment performance of UK charities hit by Greek debt crisis

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The unravelling Greek debt crisis played havoc with UK charities’ investment performance over the second quarter, according to preliminary figures from Asset Risk Consultants (ARC).

Losses in June lowered UK charity investment performance to less than 2.5% for the year to date.

Of the four different risk profiles used to classify portfolios, the riskiest – the ARC Equity Risk Charity Index – produced the worst second-quarter performance, with a return of -2.3%, including a -4.5% return for June alone.

Even the best performers – the low-risk ARC Cautious Charity Index and the medium-to-higher-risk ARC Steady Growth Charity Index – were little better, both returning -2.1% over the period.


The ARC indices are based on the actual performance, net of fees, of around 1,500 segregated UK charity portfolios run by 28 asset managers, although for the preliminary figures for June’s performance were estimated.

There are no asset class restrictions: portfolios are classified according to their volatility in relation to UK equity markets, with the ARC Cautious Charity Index carrying the least risk relative to UK equity markets, the ARC Equity Risk Charity Index the most.

Over the past month, which saw intense negotiations between Greece and its creditors culminate in a deal now rejected by Greek voters, all four risk profiles produced negative returns, with performance worsening the riskier the profile.

In June, the Cautious Index returned -2%, the Balanced Asset Index -2.9% and the Steady Growth Charity Index -3.6%.

Daniel Hurdley, head of research at ARC, said: “After hitting record highs earlier in the quarter, both bond and equity markets were down as the news flow from Athens changed on a daily basis from good to bad, and all points in between. This created uncertainty, resulting in mixed signals from central banks.”

He added: “As a result, UK equities were down around 6.4% over the month, the FTSE 100 ending the quarter around 500 points below the highs of April.

“Bond yield volatility increased due to changing sentiment on interest rate movements, so longer-dated Gilts were down around 3-3.5%, and even shorter-dated Gilts were in negative territory, at -0.4%.”

However, overseas markets were also in choppy waters, according to Hurdley.

“Global equities also suffered due to Greek uncertainty, and, in the Far East, the Chinese bubble burst, causing significant losses across Asian markets,” he said.

”Commodities were also down, leaving just some hedge funds and cash giving low but positive returns.”

As a rough guide, equity exposure in the four indices is around 30% in Cautious, 50% in Balanced, 70% in Steady Growth and 85% in Equity Risk.

Meanwhile, for the year to date, returns ranged from 0.1% for the Cautious Index to 2.4% for the Steady Growth and the Equity Risk Indices, while the Balanced Asset Index returned 1.8%.

Over the 12 months to the end of June, the best performers were the two intermediate indices, with Steady Growth returning 4.9% and Balanced Asset 4.8%.

Equity Risk made 4.2% and Cautious 3%.

Readers' comments (1)

  • Send that headline to the Daily Mail. They need it. :) If the charities had been hit by the Greek debt problems, they would have been negligent. They were more probably hit by financial market results.

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