Principal investment objective:
The Trustees’ principal investment objective is to invest the assets of the Trust Fund in such a way as to maximise the likelihood that the returns on the assets (net of tax and costs), will be sufficient to meet the anticipated invoice costs of all pre-paid funeral plans for which funds are held in the Trust.
In an effort to achieve this, the Trustees’ objective is to set a long-term investment strategy that aims to provide growth on all funeral plans, pay the operating expenses and taxes of the Trust, and maintain a robust funding level after any surplus withdrawal by the plan provider.
The Trustees also seek to limit the volatility of the funding position at any given time and this is taken into account when considering the required returns.
Investment strategy:
The Board determines its investment strategy based on the recommendations of the Investment Strategy Group (“the ISG”) and after taking advice from its investment advisers. It has put in place a diversified asset allocation which at the reporting date comprised mandates with nine investment managers to take advantage of investment expertise in different areas.
The current target allocation is to hold 50% of assets in index-linked gilts, with the other 50% divided between global equities, multi-asset funds, commercial property, infrastructure assets, corporate debt, securitised credit and cash. The asset allocation strategy is designed to ensure that the assets are diversified and of appropriate investment quality.
Over the year, the Trustees made the decision to de-risk the investment strategy as market conditions changed. To achieve this, the target allocation to the L&G Index-Linked Gilt portfolio was increased to 50% (previously 40%). As part of the de-risking, the decision was made to fully disinvest from the L&G passive equity holdings and reduce the exposure to the Ruffer Absolute Return Fund to 2.5% (decreased from 7.5%).
The allocation by asset class at 31 March 2026 is shown in the chart below.
Investment portfolio:
Protection assets are held to closely match the change in existing plan values and as a contractual inflation linkage. Growth assets aim to provide additional investment return over and above inflation in the long term, without any direct link to inflation in the short term. Real assets are also expected to provide investment outperformance, but with a strong link to inflation and so performance is expected to be positive in real terms.
Investment management:
The Trustees have investment management agreements in place with the investment managers that set out guidelines for the underlying investments held by the funds. The Trustees, with the support of its investment advisers, carry out due diligence in advance of appointment of each of the investment managers and on the operation and governance of each of the funds or mandates, and agree appropriate controls. The ISG have meetings with each of the investment managers as necessary, usually on an annual basis.
The Trustees have adopted an Environmental, Social, and Governance (“ESG”) policy of oversight. The Trustees have responsibility to ensure that the investment managers’ policies are appropriate to the specific assets they manage. This is achieved by requiring the investment managers to address the issue specifically during the annual review meeting with the ISG.
Investment performance:
The performance of the investment managers is measured against specific benchmarks and monitored by the ISG and our investment advisers. Each month our investment advisers provide the ISG with a statement of the overall performance of the investment portfolio and of the individual underlying managers. A full report is provided each quarter which is used by the Trustees in their review of investment performance.
Over the year to 31 March 2026, the gross return on the portfolio (before tax and expenses) was 7.3% with circa £31 million received in cash distributions from the invested assets to assist with cashflow. Over the five-year period, the average return on the Trust’s investment portfolio was 2.7% per annum and over the ten-year period, it was 4.5% per annum.
The 12-month period to 31 March 2026, commenced with market focus shifting towards heightened economic and geopolitical uncertainty as US tariffs caused upset in global markets. The Bank of England, European Central Bank and Federal Reserve cut rates through 2025, pausing this cycle in 2026 amidst renewed geopolitical tensions surrounding the conflict in the Middle East towards the end of the financial year.
Despite ongoing geopolitical uncertainty, overall portfolio performance was positive over the year, driven by strong performance from the growth assets and real assets held by the Trust. The portfolio of index-linked gilts also performed positively due to increasing implied inflation causing the value of the portfolio to increase. The Trust’s credit assets contributed to the positive performance as credit spreads continued to tighten over the period, reaching historic lows. The growth portfolio’s strong performance was driven by equity market rallies over the course of 2025, resulting from AI-linked stocks. The diversified growth holding over the year did not perform as strongly compared to the equity performance, given their more defensive positioning. However, this holding provided diversification benefits during periods of market turmoil. The real asset portfolio performed positively over the year, linked to improved interest rate outlooks following the rate cuts in major economies.
Outlook:
The likelihood and impact of risks to the investment portfolio are considered by the ISG at its quarterly meetings and any agreed actions and additional control measures are taken to the Board for approval. Alongside this our investment advisers are regularly instructed to perform and report on the results of stress testing scenarios.
Over the year, the ongoing appropriateness of the investment strategy is reviewed both at a portfolio and individual mandate level and required changes are made to the strategy and portfolio to respond to emerging or developing risks. The ISG continue to work to ensure the portfolio is positioned to meet its objectives and to be resilient to risks and volatility in so far as is possible now and into the future.
Christine Johnson
Chair of the Investment Strategy Group
30 June 2026