A Remarkable Growth Story

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

From an original bequest of £275,000 ($550,000), $150m income has been generated and a $110m 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 $110m 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 $53m (or 48%) of the $110m 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 $6m (or 6%) of the $110m 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 $33m instead of the $51m it is today.

It is truly a commendable achievement that the original $550,000 bequest 66 years ago is now a $110m corpus which has generated $150m of income which has been used to benefit the state of Victoria.

$109,645,146 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
2011	89,516
2012	79,809
2013	89,966
2014	100,217
2015	104,535
2016	99,609
2017	109,645
* Figure represents book value (market value unknown)