Investment Report

  • Gareth Howlett

  • Trustee & Chairman of the Investment Strategy Group
  • “During the financial year investment performance was good…but the next few years may be more challenging.”

Investment objective:

The investment objective of the Trust is to invest the funds received in such a way as to maximise the likelihood that the Trust’s assets will be sufficient to meet the costs of all pre-paid funeral plans as they mature.

In pursuit of this objective, the Trustees keep under constant review both the estimated real value in today’s terms of the Trust’s assets, including the forecast returns from those assets, and the estimated value of the Trust’s liabilities for all future anticipated payments on maturing plans. The surplus of assets over liabilities which has been built up over several years is the most important measure of the Trust’s financial strength, and the Trustees work actively with their advisers to defend it. Our Actuary’s Report explains how the surplus is measured actuarially to determine the funding level of the Trust.

Investment strategy:

In my report last year, I explained that by 2015 the funding position of the Trust had improved considerably, thanks both to the work of an earlier generation of Trustees, and to robust market returns. This allowed major changes to be made to our investment portfolio from a position of strength.

A major contributor to the improvement in the Trust’s funding position had been the exceptional performance of our holding in index-linked gilts which are our single biggest asset. The Trustees took the decision in 2015 to realise some of these gains and use them to diversify into a broader range of investments.

Last year we completed the switch from ‘active’ to ‘passive’ management of the index-linked gilt portfolio, and I am pleased to report that the new manager, Legal and General, has met the terms of their mandate and we have benefited from a significant saving in management fees following the switch.

Our current target is to hold 50% of the Trust’s assets in index-linked gilts, with the other 50% divided between global equities, diversified growth funds, long lease property, infrastructure assets, corporate debt and cash.

At 31 March 2019, the total of the Trust’s assets invested in the above asset classes (excluding cash) was £1,104.8 million and the allocation of investments is shown in the charts below. In addition, the Trust has net current assets, including cash balances held, to give total net assets of the Trust at 31 March 2019 of £1,126 million.

Investment managers:

Monitoring investment manager performance is a major part of Trustees’ duties. The full Trustee board reviews performance on at least a quarterly basis, but day to day oversight is delegated to the Investment Strategy Group (ISG). During the year under review, after extensive investigations and a thorough interview process by the ISG, the Trustees terminated the mandate of Newton Investment Management, and appointed Ruffer Investment Management in their place. The total number of investment managers therefore remained unchanged at eight as at 31 March 2019.

Senior representatives from each of these eight managers, including the senior personnel directly responsible for the Trust’s portfolios, are invited on a rolling basis to attend meetings with the ISG. This helps both to monitor performance and to understand how each manager is discharging its responsibilities.

Investment performance:

The performance of the Trust’s eight underlying investment managers is measured against specific benchmarks and monitored by the Trust’s investment advisers, Barnett Waddingham, and by the ISG. Each month, Barnett Waddingham provides the Trustees with a statement of the overall performance of the Trust and of the individual underlying investment managers. A full report is provided each quarter which is used by the Board of Trustees in their quarterly review of performance.

During the financial year 2018/19 investment performance was good both in absolute terms and relative to the Trust’s long-term benchmark of CPI + 1.5%. All areas made a positive contribution, and most of the underlying managers performed in line with, or ahead of, their specific benchmarks. While this is welcome it is not taken for granted and cannot be guaranteed. Therefore the Trustees remain vigilant for signs of deterioration in the performance of our managers and in the wider investment environment.


The Trust has benefited from generally favourable market conditions, both last year and for some years past. These conditions are not going to continue without interruption, as demonstrated by the dip in late 2018, and the next few years may be more challenging. It has been the objective of the Trustees to spread the risks of investment and to strengthen the Trust’s portfolio so that it can meet these challenges and continue to support Funeral Directors and plan holders and protect their interests.

Gareth Howlett
Chairman of the Investment Strategy Group