Investment Strategy
As an endowed charitable foundation, our investment strategy plays a vital role in enabling us to deliver long-term social impact. We balance financial resilience with our organisational values, ensuring our investments align with our mission and support the work of our partners.
We take a long-term approach to how we manage our endowment, aiming to sustain and grow the funds available for our grant-making now and in the future.
We use the profit generated by investments to fund our grantmaking. As of 31 December 2024, our endowment was valued at £1.3 billion.
The performance of our investments is vitally important to us. If they perform well, we can increase spend on grant-making. We can preserve the real value of the endowment and ensure the long-term sustainability of the Foundation.
We aim to spend 4% of our investment portfolio on grant-making over the long-term. To be sustainable, the portfolio has a goal of returning an annual 4% real return over a rolling 5-year period.
We are committed to responsible investment, and consider environmental, social and governance (ESG) factors in how we steward our assets. We engage with fund managers on issues that matter to us and our wider community. Our strategy also ensures we have the flexibility to respond to changing circumstances and continue to offer support where it’s needed most.
Investment portfolio
The Henry Smith Foundation has a diverse portfolio, including property, listed investments, and alternative assets. Our investment committee oversees performance, risk, and alignment with our broader strategic goals.
We work with professional advisors and fund managers to ensure our investments reflect our responsibility to present and future generations of grant holders. Our investment policy is reviewed regularly by the board of trustees to ensure it continues to reflect our values and long-term goals.
We are currently exploring ways to understand better the social and environmental impact of our investments and will share further information as this work develops.
2024 Investments
During 2024 we agreed to move our directly held equity investment portfolio to a new custom ESG benchmark, managed by Northern Trust. This will be implemented later in 2025. We are also exploring the potential to invest some of our property assets into social and/or community housing, to achieve market returns while providing greater social impact.
Asset Allocation and Strategy
Approximately 60% of the investment portfolio was allocated to growth assets during the year, to provide longer term returns, with the remaining allocation invested in diversifying assets. Further details are given in note 9 to the accounts.
Total Return Approach to Investing
The Charity operates a Total Return approach to investments, with freedom to invest the entire endowment with the aim of maximising total returns regardless of whether those returns accrue by way of income or capital growth. Over the long term the investment portfolio has a target annualised return of CPI +4%; over shorter periods we assess performance against a blended benchmark comprising benchmarks for the individual asset classes in which we invest.
Investment Returns for 2024
Investment returns, net of fees, were approximately £75m. Total returns for the portfolio for the year were 7.0% (2023: 4.0%), just over 5% behind the portfolio benchmark. Over the last five years the portfolio has lagged its long-term benchmark of CPI + 4% by -0.7% per annum. Portfolio performance over the last three years has struggled, with periods of high inflation and equity benchmark performance driven by a very narrow range of stocks; over longer periods the portfolio has outperformed.
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