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We help donors to give more impactfully and charities to build their resilience so they can do more of their life-changing work.

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Personal giving

From one-off donations to long-term giving, or designing your personal philanthropic strategy, we work together to help you realise your giving ambitions.

DISCOVER OUR PERSONAL GIVING SOLUTIONS

Corporate giving

You have the vision for making a difference. So do we. We help you plan how to give based on your goals.

DISCOVER OUR CORPORATE GIVING SOLUTIONS

Services for charities

Helping your charity or social enterprise become more resilient.

DISCOVER HOW WE SUPPORT CHARITIES

Insights

Discover the latest insights for donors and charitable organisations to help create a greater impact

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About us

We are a leading charity, working at the centre of the giving world. We help donors to give more impactfully and charities to build their resilience so they can do more of their life-changing work.

Find out more about CAF

Cracking the code

Understanding fund performance.

Investing without a clear plan is like setting sail without a compass. To measure success, it is crucial to understand how a fund is performing — and whether it is delivering on its goals. That is where targets, benchmarks, and fair value assessments come in. Let us break it down.

What is a fund target?

A fund target sets out what a fund aims to achieve — typically over a set period. For example, a target might be to grow your investment above inflation (as measured by the Consumer Prices Index) over rolling 10-year periods.

In other words, the fund manager expects the value of your investment will be worth what you invested, plus at least the value of inflation 10 years from the date of investment. The ‘rolling 10-year periods’ means that this target applies to any 10-year period the fund should achieve this aim.

 

What is a benchmark?

A benchmark is designed to provide you with a measure against which to judge the success of your investment. If you are investing solely in the UK stock market, a typical benchmark might be the FTSE All-Share, which reflects the performance of all publicly listed stocks in the UK. 

If your fund outperforms the benchmark, it means you have done better than the market and your confidence in the manager has been well placed.

Many funds use both a benchmark and a target, aiming to outperform the market and meet long-term goals.

 

What is a fair value assessment?

Managers of many publicly quoted investment funds are now required to issue an annual ‘fair value’ assessment. This gives investors an overview on how well the fund is meeting its targets, the costs involved, and the quality of service provided.

 

How to track your fund

There are several ways to monitor your investment. For funds regulated by the Financial Conduct Authority in the UK, funds must provide updates by way of regular reporting in their Accounts. You will also get regular valuations, although these typically show the current value of the fund rather than its overall performance.

 

Factsheets and fund data

To assess performance, investors often use fund factsheets, or similar information available on fund managers’ websites. This data is very useful in relation to your fund. 

If you are comparing performance across managers or funds, you need to be careful. You may keep these tips in mind:

  • Check the fees: Are the returns shown before or after fees? Returns “gross of fees” can look good on paper but may not reflect your actual gains.
  • Match the benchmarks: Not all benchmarks are the same. Comparing funds using different benchmarks can have a misleading picture.
  • Ignore the name game: A name like “UK Growth Fund” does not tell you much. Risk profiles and strategies can vary widely even between funds with similar names.
  • Zoom out: Focus on long-term performance. Short-term gains (or losses) can be misleading. The longer the time frame, the clearer the trend.

Let us consider this by way of an example1  – the first graph shows returns on a cumulative basis, which means that each year’s returns are added together. 

This graph cumulates data over five years. 

  • Cumulative returns show you how a fund has performed by adding new data points as they occur over the period in question. For example, daily, monthly or annually.
  • Fund 1 has returned 7% more over the period than Fund 2.
  • In isolation, this may look good for Fund 1 and might make it more likely candidate for your investment.
graph 1
Graph 2

However, let us look at the annual value of the investment over those five years.

All of the Fund 1’s increased value was in 2020. Since then, the value has fallen.

So, if you invested in 2021, you would have consistently lost value in Fund 1, whereas Fund 2 value has increased.

Typically, these returns are shown as percentages.

1These are illustrations only and not representative of any fund or index

The important point is to consider how the returns have been delivered over time. In this illustration. you need to understand why Fund 1 performed so well in 2020, whether that could happen again. Was it a one-off speculative investment that paid off? Did a key investment manager leave at the end of the year? Equally. Fund 2 seems to provide very consistent returns — so what is the likelihood of this continuing?

There are online tools that enable you to compare different funds on the same graph. One example is Trustnet’s Charting tool. There are several others available too.

In conclusion

Fund performance is not just about flashy returns. It is about understanding the goals, comparing apples to apples, and reading the data with a critical eye. With the right tools and questions, investors can cut through the noise and see how their money is really doing.

If you are thinking of investing as a charity then our guide to charity investment may help get you started.

If you would like to discuss these concepts in more detail, or require more detailed advice tailored to your charity’s specific needs, you can contact our dedicated experts team at:
T: 03000 123 3444
E: clientrelations@cafonline.org

CAF Bank Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 204451).

CAF Bank Limited Registered office is 25 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4JQ. Registered in England and Wales under number 1837656.