A Remarkable Growth Story

“Compound interest is the eighth wonder of the world” – Albert Einstein

On her death in 1951, the late Helen Macpherson Schutt (née Smith) left a bequest of £275,000 ($550,000) for the establishment of a charitable trust to benefit Victorian charities in perpetuity.

From that original bequest, $177m income has been generated, with $137m distributed to Victorian charities, while the corpus has grown to $134m.

This remarkable outcome reflects an annual compound return of 13.0% p.a. over 71 years (1951-2022), split into capital growth of 7.0% p.a. and an average income return of 6.0% p.a. These returns compare favourably to the All-Ordinaries Accumulation Index which averaged 10.9% p.a. and inflation which averaged 4.4% p.a. over the 71-year period. Expressed another way, the return achieved by the Trust over 71 years has exceeded inflation by 8.6% p.a.

This exceptional investment performance did not happen by chance.

Firstly, Helen wisely instructed her trustees to re-invest two thirds of the income generated over the first 21 years of the Trust. One of the features of compounding is the substantial benefit gained from strong growth early in the life of a fund. This income from the first 21 years of the Trust now accounts for $64m (or 48%) of the $134m corpus. In 2009 the Supreme Court of Victoria approved an Administrative Scheme which again gave the Trustees limited power to accumulate income to corpus. This power of accumulation activated by the Trustees from FY10 now accounts for $9m (or 7%) of the $134m corpus.

Secondly, the Trustees made a decision to invest primarily in growth assets (such as Australian equities) which have generated good capital gains (7.0% compound annual growth rate) over the last 71 years. If the $550,000 had only matched inflation over the 71 years it would be worth as little as $11m today. If the $550,000 had simply matched the growth of the All-Ordinaries Index over the 71 years, the original bequest would only be worth $39m instead of the $61m it is today.

At the same time the corpus has generated income of $177m (or $295m adjusted for inflation) over the 71 years which has been allocated as follows: $137m ($223m) in approved grants, operating expenses of $28m ($43m), transfers to corpus of $9m ($26m) with the remaining $3m available for future granting.

It is truly a commendable achievement that the original $550,000 bequest 71 years ago is now a $134m corpus which has generated $177m of income, used to benefit the state of Victoria.

The impact of this lasting legacy from Helen to the people of Victoria is exemplified in a summary of capital growth over the now 71 years of the Trust’s operations:

$134,144,053 invested for the future

YEAR ENDED JUNE	MARKET VALUE
	$ 000’s
1952	550*
1965	1,629*
1975	3,181
1985	10,932
1995	29,796
2000	49,645
2005	78,263
2010	83,889
2015	104,535
2020	117,694
2021	139,951
2022	134,144
* Figure represents book value (market value unknown)