Measuring a Trust’s success

words: Gareth Howlett, Trustee & Chair of the Investment Committee

Gareth Howlett is an Investment Manager and currently sits on the Investment Committee and Asset Selection Committee of Brooks Macdonald. He was formerly Chief Investment Officer of Adam and Company and has worked with major institutional investors, private clients, trusts and charities. Gareth has reported on the Trust at several recent SAIFCharter AGM meetings.

It is fair to say that The Golden Charter Trust has had a successful few years. To quote Trust Chairman Ian Blackford in his last annual Chairman’s Statement: “We have built a strong foundation for the future long-term benefit of funeral directors and plan holders.”

The Trust’s principal objective remains clearly on our radar, that the funds received are invested with a view to ensuring that at all times, there are sufficient funds to meet the anticipated invoice costs of all outstanding and maturing funeral plans.

Growth

I am therefore pleased to advise that, bearing our principal objective in mind, over the five years to 31 March 2017 the average value of a funeral plan held in the Trust has increased by 23% from £2,455 to £3,020.

Alongside this growth in plan values, the net asset value of the Trust has grown to reach £936 million in the last audited accounts to 31 March 2017, before going on to exceed £1 billion at 31 December 2017. That represents 130% growth since 2013, and is due to a combination of new plan sales flowing into the Trust and the investment growth in the Trust’s assets. Importantly, Trust assets continue to be more than 100% of the funds required to meet future funeral costs, allowing for increases in line with long term forecast CPI.

Equally importantly, the Trust anticipates continued growth in line with Golden Charter’s plan sales forecasts, and from prudent management of the Trust’s investments.

As I outlined at the last SAIFCharter AGM, the Trust’s current financial strength is sufficient to meet its liabilities in full even in the very unlikely circumstances of, for example, all plan holders cancelling. It would take a combination of unusual and extreme investment market conditions to change that fact, including a 30% fall in equity values. Nothing is guaranteed when predicting the future of financial markets, but the results of our ‘stress test’ are reassuring.

Future conditions

Undeniably our Trust has benefited from the significant growth in recent years in the investment markets. 50% of funds are currently invested in index-linked gilts, and the performance of these low-risk government issued bonds has been unusually strong, contributing to the Trust’s overall impressive performance in recent years.

Those high gilt returns are the kinds of results that we would expect to return to more normal, lower levels in the years ahead, which is why we confirmed last month that we would be aligning the growth rates on the Independent Way and Golden Charter standared plan sub-funds, to maximise security for those Independents who will carry out the funerals. Moving to a 2.5% growth rate for both sub-funds for 2018/19 helps to maintain our objective to pay growth at least at the level of long-term forecast CPI.

As the financial year comes to a close, we will look to provide you with more detail on our progress in 2017/18. However, The Golden Charter Trust’s recent sustained growth, and the decisions made to preserve it, put us in a strong position as we look to the future.

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