2012: risk assets up, charity down
02012 began with ongoing concerns that there would be a global financial calamity, with many expecting if not anticipating the end of the euro.
But 2012 turned out to be the year that financial assets – just about all of them – made money.
And unlike 2011, the year of the safe asset, 2012’s star performers were decidedly risky and often (peripheral) European.
Greek, Portuguese, Irish, and Italian government bonds were star performers, as were Turkish, Indian, German, and Polish equities.
Unusually, no major bond or equity indices posted negative returns.
In fact, the only assets in our [pretty comprehensive] universe with negative returns were coffee, natural gas, and aluminum.
Very high (or low) returns tend to get reversed from one year to the next. Peripheral bonds (except Ireland’s) were a disaster in 2011.
Some markets have now had strong returns two years in a row: Irish government bonds, corn, and Investment Grade debt are standouts.
Natural gas was the opposite: -43% in 2011 and -23.5% in 2012. In general, commodity performance was particularly heterogeneous in 2012.
2013 begins will low all-in yields all across fixed income markets and credit risk appetite in extreme euphoria. If there is mean reversion, bonds may well go to the bottom of the class.
Meanwhile, the climate has been difficult for many charities raising funds.
For UK-domestic charities, it looks that charitable donations were down around 15% in real terms, to £9.3bn in 2011/12. This was the worst drop in eight years.
Over in the States, the US Million Dollar List reported that philanthropic giving in the United States has now fallen for five years, with $12bn in 2012, as against $43bn in 2007. The 2012 figure is the lowest since records commenced in 2000
We can hope for better in 2013.
James Bevan is chief investment officer of CCLA, specialist fund manager for charities and the public sector. CCLA launched The Public Sector Deposit Fund in 2011 to meet the needs of local authorities and other public sector organisations. You can follow James on twitter @jamesbevan_ccla
