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Benchmarking

What is a good benchmark?

What is the Charity Commission guidance on benchmarking performance?

In CC14, the Charity Commission for England and Wales' guide on investments, it states that Trustees should: "agree performance measures so that all parties know what is expected of them" and "establish monitoring and review arrangements to make sure the charity continues to be satisfied with performance". It also states that the statement of investment policy should include information on how investments will be managed and benchmarks and targets set by which performance will be judged. Section 7 of CC14 the Charity Commission provides more detail on performance measurement.

For charities not based in England and Wales, we would recommend adopting this as best practice.

Statement of investment policy

Writing a statement of investment policy may seem like a daunting task. However it shouldn't be and here is our guide to help charities construct their policy.

Download

How we set up benchmarks?

When determining benchmarks it is important that the charity is happy with the proposed comparators and does not feel that benchmarks have been imposed rather than agreed. Therefore whilst we will always propose comparison benchmarks, we will always discuss these with the Trustees in order to agree a suitable and mutually acceptable benchmark.

We always show performance net of all fees and costs against benchmarks in order to show the returns achieved for the charity net of all costs.

Relative benchmark

This is to compare the performance of a portfolio versus a long-term strategic asset allocation to see whether: The manager adds value and to judge both asset and stock allocation decisions.

Peer group benchmark

A peer group measurement so that the Trustees are able to evaluate our performance versus other charity investment managers.

Long-term inflation plus objective benchmark

An inflation plus long term benchmark is important as charities are looking to preserve the real value of their investments (i.e. protect against inflation) as well as generate a return above this (income or total return) over the long term.

Relative benchmark example

In the short term the value of the portfolio will fluctuate and therefore we would use relative benchmarks which may be a composite of market indices. For a portfolio pursuing a target return CPI plus 3.5% annualised over the longer term within a medium risk profile, we would recommend the following benchmark and ranges which reflect our long-term asset allocation to achieve the targeted return.

Quilter Cheviot current positioning (as at 1.5.2017)

Long-term strategic asset allocation and benchmark

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What people say

"This is one of the best newsletters of this kind I have ever seen. Well written and informative on topics of genuine interest. I will certainly share it with my Board." 

Fabian French, CEO of UK Community Foundation