Roadshows December 2018 _______________________________________ - PowerPoint PPT Presentation

Roadshows December 2018 _______________________________________ Steve Thomas Julia Hill Yvonne Thompson Oliver Jones-Davies - CCLA Nigel Burden - NatWest Bank Natalie Warn – NatWest Bank

Introduction • Welcome, thank you for coming! • Health and safety: location of fire exits and toilets • Speakers:  CCLA  NatWest Bank  Cardreaders  Support  Cashbook • Question and Answer session • Feedback at end

HELPING YOUR CHURCH THRIVE INTO THE FUTURE MAKING YOUR MONEY WORK FOR YOUR MISSION Oliver Jones-Davies, Client Investment Director 7 th December 2018

LOW INTEREST RATES GIVE A HIGH COST TO CERTAINTY Implied Bank of England Official Base Rate 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 01/06/2018 01/10/2018 01/02/2019 01/06/2019 01/10/2019 01/02/2020 01/06/2020 01/10/2020 01/02/2021 01/06/2021 01/10/2021 01/02/2022 01/06/2022 01/10/2022 01/02/2023 01/06/2023 01/10/2023 01/02/2024 01/06/2024 01/10/2024 01/02/2025 01/06/2025 01/10/2025 01/02/2026 after Nov 2017 Inflation Report after Feb 2018 Inflation Report Meanwhile, inflation (CPI) is 2.4% as at October 2018 Source: CCLA & Bloomberg 4 Bath & Wells Parish Training 7th December 2018

EVEN MODEST INFLATION HAS A DAMAGING EFFECT OVER THE LONG TERM Real value of £100 today that’s been held for … £100 £90 £80 £70 £60 £50 £40 £30 £20 £10 £0 5 years 10 years 20 years Source: CCLA & ONS. Based on CPI index June 1988-2018. 5 Bath & Wells Parish Training 7th December 2018

QUESTIONS YOU SHOULD BE CONSIDERING • Timescale for liability − What are short term requirements? − What is seen as long term and therefore appropriate to consider investment options? − Will vary across sub accounts (unrestricted, designated, restricted, permanently endowed) • Income needs – size and growth • Capital needs – size and growth • Tolerance for volatility of both • Investment restrictions e.g. ethical, permanent endowment What are you holding the cash for? 6 Bath & Wells Parish Training 7th December 2018

REASONS GIVEN FOR STAYING IN CASH • We don’t know when we will need monies – You can estimate for non insurance covered outgoings • We need access to the funds – How quickly? Today? Next week? In six months’ time? • It’s not my money – it’s too risky - safety first minimises criticism – Safety now v future safety • We have very limited investment knowledge on the PCC – 1958 Church Funds Investment measure recognised this Matthew 25:14-30 7 Bath & Wells Parish Training 7th December 2018

REASONS TO MOVE AWAY FROM CASH • Interest rates are likely to lag inflation − The spending power of your cash reserve is shrinking (even if you do not spend the interest) • Staying in cash over time makes life for your church more difficult − Costs (labour and materials) are very likely to rise faster than inflation • Replacing cash reserves takes time and energy from congregation Cash is not risk free 8 Bath & Wells Parish Training 7th December 2018

IF NOT CASH, THEN WHAT? • Fixed income (‘bonds’) • Equities (shares) • Property We need to look at both the income and capital components of total return 9 Bath & Wells Parish Training 7th December 2018

INCOME AND CAPITAL RETURNS FROM UK EQUITIES 30% 20% 10% 0% -10% -20% -30% -40% Equity price movement Income yield Capital returns are more volatile than income Source: Barclays 10 Bath & Wells Parish Training 7th December 2018

INCOME - THE CERTAINTY OF CASH...AND ITS COST - EXAMPLE 1 Holdings Market value Income Forecast annual income Yield Cash £40,000 0.55% £220 TOTAL PORTFOLIO £40,000 0.55% £220 11 Bath & Wells Parish Training 7th December 2018

INCOME - CERTAINTY VS COST - EXAMPLE 2 Holdings Market value Income Forecast annual income Yield Multi-asset Fund £10,000 3.10% £310 Cash £30,000 0.55% £165 TOTAL PORTFOLIO £40,000 1.19% £475 12 Bath & Wells Parish Training 7th December 2018

INCOME - CERTAINTY VS COST - EXAMPLE 3 Holdings Market value Income Forecast annual income Yield Multi-asset Fund £20,000 3.10% £620 Cash £20,000 0.55% £110 TOTAL PORTFOLIO £40,000 1.82% £730 13 Bath & Wells Parish Training 7th December 2018

A TALE OF TWO CHURCHES – WHICH HAS MANAGED RISK BETTER? £40,000 invested 1 Jan 1993: income returns and movement in capital value £40,000 cash only £30,000 cash, £10,000 equities £3,000 £70,000 £3,000 £70,000 £60,000 £60,000 £2,500 £2,500 £50,000 £50,000 £2,000 £2,000 £40,000 £40,000 £1,500 £1,500 £30,000 £30,000 £1,000 £1,000 £20,000 £20,000 £500 £500 £10,000 £10,000 £0 £0 £0 £0 Income in yr (lhs) Balance sheet year end Income in yr Balance sheet yr end Source: CCLA, Barclays as at 31.12.17. Based on nominal UK equity prices, equity income yield and average 3 mth sterling LIBOR. If cash balances are likely to persist, a modest allocation to real investments can make good sense

MARKET REVIEW – 10 YEAR RETURNS TO 31 OCTOBER 2018 +300% +250% +200% +150% +100% +50% +0% -50% 31/10/2008 31/10/2010 31/10/2012 31/10/2014 31/10/2016 31/10/2018 UK Equities +135.30% Global Equities +220.49% UK Government Bonds +74.07% Cash +4.29% Inflation +23.81% UK Commercial Property +105.09% Source: Bloomberg as at 31 October 2018 15 Bath & Wells Parish Training 7th December 2018

ACCESSING INVESTMENTS - MERITS OF POOLED FUNDS • Consistent professional management across all assets • Control of risk − Diversification − Risk modelling • Lower costs − Commissions − Benefits of scale • Administratively simple 16 Bath & Wells Parish Training 7th December 2018

ABOUT CCLA • Heads up! - We are now changing the conversation from generalities to include company specific material • CCLA is a leading manager of Church and charity assets in the UK • We allocate all our resources to the needs of the sector • We are predominantly owned by our clients 17 Bath & Wells Parish Training 7th December 2018

CCLA POOLED FUND RANGE FOR THE CHURCH OF ENGLAND • Common investment funds: specialist pooled funds available to charities − Charities in their own right − Board of trustees gives extra level of oversight • The CCLA CBF funds are designed specifically for use by Church of England bodies • CBF funds all follow Church ethical guidelines 18 Bath & Wells Parish Training 7th December 2018

CCLA FUND RANGE FOR THE CHURCH OF ENGLAND • Core Funds − CBF Deposit Fund (deals daily) − CBF Investment Fund (deals weekly-Tuesday) • Specialist Funds − CBF Fixed Interest Securities Fund (deals weekly-Tuesday) − CBF Global Equity Income Fund (deals weekly-Tuesday) − CBF Property Fund (deals monthly- last Tuesday) − CBF UK Equity Fund (deals weekly-Tuesday) • Most funds have choice of income and accumulation units • Client Service team 0800 022 3505 19 Bath & Wells Parish Training 7th December 2018

THE CBF CHURCH OF ENGLAND FUNDS – LATEST PUBLISHED FEES AND COSTS The CBF Church of England Funds Annual Management Ongoing Charges Charge (AMC) Figure (OCF)* Total Charge Investment Fund 0.55% 0.68% Fixed Interest Securities Fund 0.22% 0.35% Property Fund** 0.65% 0.69% Global Equity Income Fund 0.75% 0.96% UK Equity Fund 0.50% 0.68% Deposit Fund 0.20% 0.26% *The difference between the AMC and the OCF consists of irrecoverable taxes (including VAT), legal, audit, custody and other third party costs. The OCFs quoted above are taken from the latest Report & Accounts and are not a guarantee of future OCFs which are subject to change. **VAT charged to the property fund is recoverable Spreads are subject to change to reflect actual costs incurred; details of current spreads are available upon request 20 Bath & Wells Parish Training 7th December 2018

THE CBF CHURCH OF ENGLAND INVESTMENT FUND • A suitable multi-asset, long-term fund Asset Allocation for most Church charities Overseas Equities 52.47% UK Equities 17.60% • Designed to help meet growth and Infrastructure & Operating income requirements Assets 9.43% Contractual & Other Income 4.78% • Seeks to provide highly diversified Property 4.47% and well balanced spread of Private Equity & Other 3.73% investments Overseas Equity % • Focus on delivering attractive, North America 34.8 Europe ex UK 10.1 growing income Asia Pacific ex Japan 3.9 Japan 3.7 • Steady income, current yield 3.15%* 52.5 • Fund size £1,429m Source: CCLA as at 30 September 2018 *Based upon mid-market price as at 30 September 2018 and a projected annual distribution of 54.89p per unit. Asset allocation is subject to change. 21 Bath & Wells Parish Training 7th December 2018