The ACI provide a dedicated benchmark for UK charity investment portfolios, reflecting their distinct income, ethical and strategic priorities.
The construction methodology is similar and some of the portfolios included in the calculation of the ARC Sterling PCI series will also be included in the calculation of the ARC Charity Indices.
However, it is recognized that charities operate within a distinct sector that often demands specific investment strategies and considerations. For instance, while some firms choose to combine their private client and charity divisions others opt for a more specialized approach, maintaining separate divisions to cater specifically to the differing needs of charity clients.
Charities typically have specific objectives that go beyond mere financial returns; these may include a strong emphasis on income generation to support ongoing initiatives and adherence to ethical investment constraints that align with their mission. Recognizing these significant differences, it was deemed appropriate to publish separate indices for charities. This ensures that the ARC Charity Indices are entirely relevant to the charity community, reflecting their unique investment landscapes and goals. As a result, only charity portfolios are included in the calculation of the ARC Charity Indices, thereby providing a more accurate representation of performance for charities seeking to gauge their investment effectiveness.
While the two sets of Indices exhibit very similar return profiles during normal market conditions, the divergence becomes pronounced during periods of severe market movements. These fluctuations highlight how charities' greater focus on sustainable income generation and adherence to ethical investment practices can lead to a material divergence in return profiles when compared to private client portfolios that may share similar volatility characteristics. This distinction is crucial for stakeholders within the charity sector, as it underscores the importance of tailored investment strategies that align with their specific objectives and values.