The Foundation was formed as a grantmaking charity from a generous endowment by John Reeves Ellerman, 2nd Baronet in 1971. Investing our endowment provides us with greater capacity to make grants to charities in the long term.
Our overall approach is to invest and manage our funds in a way that balances the desire to maintain the financial capacity for grantmaking over the long-term, with direct support for our aims through our investment activities.
Our financial objective is to generate a total investment return sufficient to enable the charity to carry out its operations continuously over the long-term with due and proper consideration for future needs and the maintenance of, and if possible, enhancement of, the real value of the portfolio. The current financial objective is to achieve a real return of 4% per annum (calculated as a Total Return target of 4% + CPIH) in the long term. CPIH is an inflationary measure and is defined as the Consumer Prices Index including owner occupiers' housing costs.
The value of our investments varies with movements in financial markets. At the end of our last financial year, 31 March 2023, the portfolio value was £146 million.
You can read our full Investment Policy by clicking here, and a summary of the key points is shared below.
Looking after our money
Our Trustees are responsible for the endowment and the management is delegated to our Finance and Investment Committee. This Committee sets the investment strategy for the endowment. The funds are managed by carefully selected active managers and are diversified across a range of asset classes. We currently have six fund managers who determine the asset allocation of their own portfolios. The Committee also takes advice from specialist consultants.
Our level of proposed spending for the coming year is discussed at the February Finance and Investment Committee Meeting, before being approved by the Board of Trustees in March in the same year. Historically, the agreed policy has been an annual total expenditure budget of 4.5% of the Foundation’s net assets (net of investment management fees) averaged over the quarter end values of the last three calendar years. In the case of a grant under or overspend, the Trustee Board makes a decision that year as to whether to carry forward the balance to the following year.
As a long-term investor, our approach is evolving. Since 2020, we have been more proactive in seeking to address the fact that some of the investment decisions made on our behalf end up supporting corporate strategies, approaches or products that are poorly aligned with our aim. In practice, this means that we want to:
- Invest in a sustainable way i.e. to support long-term environmental and societal sustainability and to help address the climate and nature emergencies.
- Be a responsible investor i.e. to take full account of ESG (environment, social and governance) issues in our investment activities.
- Be transparent, accountable and effective.
- Work with other actors, including trusts and foundations, in the financial system in the transformation of systems and institutions for managing investments.
- Identify and make investments that could act in support of our aims.
- Achieve the above in such a way that any positive non-financial impact from our investments exceeds any financial returns foregone to achieve them.
The tools and opportunities which help us achieve this approach include: our investment policy and strategy; the mandates with our fund managers who are responsible for the day to day investment activity undertaken on our behalf; engagement with the companies in which we invest and wider systemic actors (such as regulators, banks and other service providers); the exercise of our voting rights at company meetings and investment that may contribute more directly to our aims.