A Remarkable Growth Story

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

From an original bequest of £275,000 ($550,000), $166m income has been generated and a $118m 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 $118m as at 30 June 2020. 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 $118m 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 $8m (or 7%) of the $118m 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 69 years. If the $550,000 had only matched inflation over the 69 years it would be worth as little as $10m today. If the $550,000 had simply matched the growth of the All Ordinaries Index over the 69 years, the original bequest would only be worth $34m instead of the $54m it is today.

At the same time the corpus has generated income of $166m (or $259m adjusted for inflation) over the 69 years which has been allocated as follows: $129m ($194m) in approved grants, operating expenses of $25m ($37m), transfers to corpus of $8m ($24m) with the remaining $4m available for future granting.

It is truly a commendable achievement that the original $550,000 bequest 69 years ago is now a $118m corpus which has generated $166m 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 69 years of HMSTrust’s operations:

$117,694,400 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
2016	99,609
2017	109,645
2018	116,502
2019	126,132
2020	117,694
* Figure represents book value (market value unknown)