Investment Report

  • Gareth Howlett

  • Trustee & Chairman of the Investment Strategy Group
  • “The Trust’s funding position is healthy, and investment returns have been satisfactory, however, the Trustees remain vigilant.”

Principal investment objective

The Trustees’ principal investment objective is to invest the Trust’s assets in such a way as to maximise the likelihood that the assets will be sufficient to meet the costs of all pre-paid funeral plans as they mature. The investment strategy is therefore geared towards achieving the required rate of investment return, not only to enable the Trust Fund to meet its objectives in the long term, but also in a manner that deals with maturing funeral plans in the short and medium terms.

Investment strategy

To meet with the principal objective, the Trustees regularly review the Trust’s investment strategy throughout the year. In my last report, I reported on the changes in investment strategy, which had been decided by the Trustees, in conjunction with our investment advisers, during the 2015/16 financial year. The Trust Fund’s long-term target is now to hold 55% of assets in index-linked gilts, with the balance of 45% divided amongst global equities, diversified growth funds, long lease property, infrastructure assets and cash. The implementation of these changes has been a continuing process over the last two years, and it was largely completed by the year-end.

An additional significant change will be implemented in the 2017/18 financial year, following the Trustees’ decision that the index-linked portfolio should be run on a ‘passive’ rather than an ‘active’ basis. This decision was made on the grounds of cost reduction and protection against the risk of underperformance.

This means that the manager of our index-linked portfolio will no longer buy and sell holdings frequently in order to try and beat a ‘benchmark’ index: instead, they will try to track the performance of the benchmark by holding the specific gilts of which it is composed. As a result of this decision, Royal London Asset Management (RLAM), who have served the Trust well for many years, will be replaced by Legal and General Investment Management (LGIM). The change of investment manager will take effect during the third quarter of 2017 and the impact of the change from active to passive management of our index-linked gilt portfolio will, subject to market volatility, result in smoother performance and a significant reduction in management costs.

The Trustees have also taken the separate decision to replace RLAM with Aubrey Capital Management in the role of the independent investment manager of the Trust’s assets. This role is a requirement of the Financial Services and Markets Act 2000, and applies to the Trust’s investment in Golden Charter Trust Limited, a wholly owned subsidiary company, which holds the various investment portfolios for the Trust’s benefit. The role is purely regulatory but the Trustees believe it should not be held by any investment manager which is, or could be, a manager of any of the underlying assets owned by the Trust through its subsidiary company.

Investment managers

At 31 March 2017, the Trustees employed RLAM, Aviva Investors, Partners Group, Artisan Partners, Newton, Baillie Gifford and Threadneedle as their investment managers. This allocation by investment manager and asset classes at 31 March 2017 is shown in the charts below.

Summary

The Trust’s funding position is healthy and investment returns have been satisfactory. However, the Trustees remain vigilant in case either of these key indicators show signs on weakness.

Gareth Howlett
Trustee & Chairman of the Investment Strategy Group
March 2017