A Remarkable Growth Story

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

From an original bequest of £275,000 ($550,000), $155m income has been generated and a $116m corpus invested for the future.

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 in perpetuity to benefit all Victorians.

Remarkably, the invested assets of HMSTrust’s corpus have grown from the initial benefaction of $550,000 in 1951 to $116m today. 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 $56m (or 48%) of the $116m 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 $7m (or 6%) of the $116m corpus.

Secondly, the Trustees made a decision to invest primarily in growth assets (such as Australian equities) which have generated good capital gains (7.2% compound annual growth rate) over the last 66 years. If the $550,000 had only matched inflation it would be worth as little as $10m today.

Finally, but very importantly, HMSTrust has managed its investments internally from inception, and has invested astutely in better performing companies. If the $550,000 had simply matched the growth of the All Ordinaries Index over the 66 years, the corpus would only be worth $36m instead of the $53m it is today.At the same time the corpus has generated income of $155m (or $245m adjusted for inflation) over the 67 years which has been allocated as follows: $121m ($184m) in approved grants, operating expenses of $23m ($34m), transfers to corpus of $7m ($23m) with the remaining $4m available for future granting.