Barclays Charity Fund

Barclays Investment Solutions Charity Investments Team

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Barclays Charity Fund Quarterly Performance Report June 2020


Barclays June 2020 2

Contents

Contents ........................................................................... 2

Market Backdrop ........................................................... 3

Fund Performance......................................................... 4

Portfolio Activity ............................................................ 5

Portfolio Asset Allocation ........................................... 6

Direct Equity Portfolio .................................................. 7

Responsible Investing .................................................. 8

Looking Forward............................................................ 9

Keeping up to speed with our research ..............10

Appendix – Historical Performance ......................11



Market Backdrop

Fig 1: Market returns as at 30th June 2020. Past performance of investments is not a reliable indicator of their future performance. The value of investments and any income can fall. For discrete 5-year performance of these indices, see page 11. Source: Bloomberg. Indices used: Bloomberg Barclays Sterling Gilts, MSCI USA Net Total Return, MSCI UK Net Total Return, MSCI Europe ex UK Net Total Return, MSCI Emerging Markets Net Total Return (GBP)

Coronavirus continues to dominate headlines…

As most countries seem to have moved past their peaks in new cases cautious moves have been made to reopen

economies. Investor sentiment is still very sensitive to news of new outbreaks but authorities have been faster and more flexible in their containment strategies, as has

been seen following localised incidents in China and the US. In some corners of emerging markets the pandemic

remains a significant threat. While significant investment has been made, the timeline for potential vaccines and

treatments remains uncertain.

… and policies remain accommodative…

The enormous level of policy support has lifted investor sentiment as fears of the worst case economic scenario

have receded. However, the short-term consequences for the world’s economy will be severe and so policy will

remain accommodative. This means interest rates have

been lowered from already low levels before the pandemic and are likely to remain so for some time. Governments

have announced stimulative policies such as infrastructure projects in the US while Europe took steps closer to fiscal

integration to fund its plans. There have been promising economic statistics released towards the end of the quarter

with the US labour market recovering faster than expected.

… fuelling a strong rebound so far.

Having entered the crisis earlier economies such as China are further along the path to recovery. As investors turned

their focus to prospects post the pandemic we saw global stock markets recover even in the hardest hit sectors. Corporate bonds were helped by the improved sentiment

while all bonds were supported by the lower interest rates introduced by central banks and inflationary pressures

remaining muted.

-25

-15

-5

5

15

25

UK Government Bonds(£)

UK (£) USA ($) Europe ex UK (€) Emerging Markets (£)

2019 2020



Fund Performance 2020 Q2 – Performance has picked up alongside market rally

Fig 2: Charity Fund performance to June 2020 Past performance of investments is not a reliable indicator of their future performance. The value of investments and any income can fall. For a description of the ARC Index and discrete 5 year performance of indices, see page 11.

The calm after the storm

• As frequently happens, periods of stress in markets are very quickly followed by strength. The second

quarter of the year followed this pattern. The Fund recovered strongly in the quarter delivering a total

return of 12.8%.

• All asset classes delivered positive returns over the quarter but it was the Fund’s exposure to Equities

that drove performance.

Income remains subdued

• Dividends were cut as companies stayed prudent and solvency remains the priority while shutdowns

were enforced.

• We expect dividends to return given the high quality

bias to our holdings and support provided from the authorities, although there will be some caution

while risks remain on the horizon.

Performance contributors and detractors

• In a reversal of Q1, all asset classes provided a positive return though Equities led the way. We saw very strong performances from funds such as

Fidelity Asia, Blackrock Continental European Income and Janus Henderson Global Sustainable Equity.

• Exposure to Technology stocks within the Loomis Sayles US Growth fund saw this holding maintain its extremely strong performance over the year.

• Investment Grade and High Yield Bonds also

delivered strong returns with the GlobalAccess Global High Yield Bond fund generating positive

returns of 9.3% this quarter.

• Areas of Real Estate remain challenging, as questions regarding the future use of Office space have emerged. However, other sectors exposed to

Logistics have more positive prospects as the demand for online shopping continues to grow.

Fig 3: Barclays Charity Fund performance comparison to ARC

Past performance of investments is not a reliable indicator of their future performance. The value of investments and any income can fall.

0%

10%

20%

30%

40%

50%

60%

70%BCFARC Steady Growth ACI

to end-June 2020: 2020 YtD 2019 2018 2017 3 yr (pa) 5 yr (pa) Fund -7.3% 17.6 % -4.1% 11.7% 3.7% 6.2% 12m distribution yield 3.1%

Next distribution 0.96p ARC Steady Growth -5.1% 15.6% -4.9% 9.4% 2.9% 5.2% Distribution date 31-Jul relative -2.2% 2.0% 0.8% 2.3% 0.8% 1.0%

Income Summary



Portfolio Activity Finding selective opportunities in volatile markets

Fig 4: Transactional activity over the last quarter

Tactical adjustments to exposure • As asset markets sold off in March, the value of

corporate debt also became much cheaper. The swift response from central banks included extensions to bond purchase programmes, the

purpose of which was to bolster market activity and mitigate the risk of default. With such support

provided to these markets, we viewed valuations as very attractive and increased our positions in both

Investment Grade and High Yield Bonds.

• Since adding to Equities towards the end of Q1, global markets have rebounded sharply and new

economic risks, such as secondary outbreaks and renewed US-China tensions, have emerged. These

events, coupled with excessive investor optimism, have led us to reduce equities towards the end of

the quarter.

• We also adopted a more cautious view on Emerging Market Bonds, where local central banks stepping

in to ease the burden through monetary policies would weigh on EM currencies.

Thematic repositioning of Equities • Markets this quarter have been characterised by

volatility, which presents good opportunities to make tactical changes to our stock positions, whilst keeping our focus on high-quality companies that

can weather the coronavirus storm and beyond.

• New positions in the fund include Medtronic and Visa. Both provide long-term growth potential as

they benefit from structural trends in Healthcare and Digital payments respectively. Not only a

market leader in medical devices and supplies, Medtronic also boasts an impressive pipeline of

innovative products that it can produce at great economies of scale. Similarly, Visa has made

strategic investments to take advantage of the rapid rise of online payments.

• We fully sold HSBC and John Wood Group in view of their financials and structural challenges that would hamper their recovery and future growth.

• We decided to sell Aveva and switch into Alphabet. Although Aveva is a great UK Tech stock with excellent management, they remain heavily

exposed to the Energy sector which could be more challenged in the short term. Consequently, we took our profits and placed the proceeds in

Alphabet, which brings a different structural story to our direct holdings. Overall, this tech giant offers

compelling growth and financial strength at a reasonable valuation.

Increased Equity

Added Structured Note

Increased Bonds

Reduced EquitiesRefined Direct Equity

March April – May June

Wealth and Investment Management Charity Investments Team


Portfolio Asset Allocation Interest rates remaining lower for longer will continue to support equities

Long term focus on equities • Our longer term investment horizons mean that we

have a relative preference for equities over bonds to

generate returns over longer periods through a combination of income and capital growth.

• Within global equities, Asia and US make up the bulk of the allocation (nearly two-thirds of equity investments are outside the UK).

• Our low conviction in returns prospects for commodities dilutes our enthusiasm. Our “alternatives” exposure is gained through property

providing strong and secure income and via a structured note delivering a high level of income.

Fig 5: Broad Asset Allocation as at 30 June 2020

Our Current Portfolio CASH & SHORT MATURITY 4.0%

GOVERNMENT BONDS 1.2%

DIRECT INVESTMENT GRADE BONDS 4.3%

HIGHER YIELDING BONDS 7.0%

Pimco Global Diversified Income

Global Access High Yield Fund

iShares JPM Emerging Market Bond ETF

TOTAL EQUITIES 73.3%

UK Equities 38.9%

Direct Equities

Merian UK Mid Cap Fund

European Equities 4.0%

Blackrock European Income Fund

US Equities 11.8%

xTrackers USA ESG ETF

Loomis US Growth Fund

Findlay Park American Fund

Robeco US Premium Fund

Direct: Visa, Medtronic, Alphabet (Google)

Japan Equities 1.1%

xTrackers Japan ESG ETF

Global Equities 4.3%

Henderson Global Sustainable Fund

xTrackers Global ESG ETF

Asia-Pacific & Emerging Markets 13.2%

Robeco Emerging Conservative Equity Fund

Henderson Asia Dividend Fund

Fidelity Asia Fund

PROPERTY 8.2%

Mayfair Property Income Trust for Charities

iShares Developed Property ETF

ALTERNATIVE INVESTMENTS 1.9%

Goldman Sachs 9.5% Structured Note

Cash, 4.0 %

Bonds, 12.5 %

UK Equities,

38.9 %

Global Equities,

34.4 %

Property, 8.2 %

Alternative Investments, 1.9 %



Direct Equity Portfolio A focus on higher quality companies with international exposure

Fig 6: Charity Fund Direct Equity Sector Allocation

A recovery for UK equities Alongside global markets, UK equities rebounded this

quarter as the economy slowly emerges from lockdown. Some of the hardest hit sectors have begun to catch up, as investors are encouraged by early signs that the

trough in activities is now behind us.

The mining sector rebounded strongly as China, the world’s largest commodity consumer, remains the

furthest along the path to recovery. Manufacturing surveys indicating robust sentiment fuelled optimism for

BHP and Rio Tinto while industrial companies also rallied. In particular, Bunzl reported strong results with resilient

margins amidst difficult trading conditions. Having had a difficult Q1, it was pleasing to see Melrose post better

returns in Q2.

After selling HSBC, our financial exposure is to less challenged companies. London Stock Exchange, which we believe is one of the best quality financial names in

Europe, contributed positively this quarter. More

generally, having improved both their capital bases and lending practices, financials have higher relative security now than at the time of the Great Financial Crisis.

Defensive businesses continued to contribute to

portfolios, as earnings visibility proved valuable in these uncertain times. Consumer behaviour during lockdown

also boosted sales due to panic buying with companies such as Reckitt Benckiser and Unilever extending their

rallies year-to-date.

In contrast, the energy sector has not participated in the rebound, as oil companies such as BP and Royal Dutch Shell continued to lag. Although they have recently taken prudent steps to reassess their long term assets and

dividend plans in light of current challenges to the business model, oil prices have not recovered as global demand remains tepid.



Responsible Investing Accelerated themes resulting from the pandemic

The coronavirus pandemic has had a massive short term

impact globally but will also change the world in the longer term. As economies recover the focus on some of

the trends that hit the headlines in 2019, such as single use plastics, are temporarily being reversed as health

considerations outweigh ecological ones.

However, some trends have been vastly accelerated by the implications of the lockdown world. Two of which

were the cashless society and the increasing use of technology in our healthcare systems.

The pandemic caused the use of cash to be actively

discouraged with contactless payments and online transactions taking its place. This is clearly a trend before the pandemic but significantly accelerated

especially in emerging economies where cash is more prevalent.

Today about half the world’s adult population deal

exclusively in cash; this is risky, expensive and inefficient . According to the World Bank, increasing digital

payments leads to significant administrative savings and helps reduce corruption and fraud.

There are some concerns about restricting cash in the

most vulnerable of communities but increasing digital payments is a key enabler of financial inclusion, which

the World Bank links to seven of the UN’s Sustainable Development Goals.

Healthcare systems have been placed under significant strain by the pandemic with shortcomings in capacity

and capability exposed. Vital equipment, such as PPE, was in short supply, and diagnosis and treatment has

been wanting. We see a likely result of this being increasing use of technology in the sector as consumers

embrace different ways of managing their own wellbeing.

Portfolio implementation

Visa is ideally set to benefit in a cashless world. The company has about a 15% share of global physical point

of sale payments, but this rises to 43% in the digital space. The company has also made recent acquisitions

to take share beyond the consumer space. In 2015, Visa made a commitment to provide payment accounts for

another 500 million people who do not use banking services as part of the World Bank’s call for Universal

Financial Access by 2020.

Medtronic is the largest medical equipment company whose portfolio includes a number of products that are focused on reducing re-hospitalization, some

incorporating wearable technology, remote patient monitoring capabilities and predictive healthcare analytics. The company has significant exposure to AI (Artificial Intelligence) and robotics and the portfolio is

well positioned to benefit from the mega-theme of aging populations with many of its therapies aimed at the over

65s.



Looking Forward Global recession for this year, followed by a rebound next year

Fig 7: Real economic growth by region for calendar years 2019 and 2020/2021 (estimates) Past performance is not a reliable indicator of future performance. The value of investments and any income can fall. Source: Barclays Research as at 18th June 2020 Weights used for real GDP are based on IMF PPP-based GDP (5yr centred moving averages). Weights used for consumer prices are based on IMF nominal GDP.

The road to recovery is uncertain…

Governments globally are carefully weighing the net benefits of lifting current restrictions. The US experience

has recently been somewhat concerning, but many countries in Europe and Asia have implemented effect i ve strategies to bring back normal mobility conditions.

When implemented successfully, the re-openings have proven to unlock pent up demand and fuel a strong

rebound in economic activity, even though it may take some time to reach pre-virus levels. The UK is slightly

lagging in this process since the number of cases had taken a while to peak, but there is fundamentally no first-

mover advantage in reopening earlier.

…as companies reassess shareholder compensation.

As we mentioned last quarter, prudent companies are

suspending dividend payments. Payments year-to-date include commitments made in 2019, so it is in the second half of 2020 where we expect payments to be cut the

most. However, dividend growth is expected to return in 2021 as businesses regain clarity.

Economies face a delicate balancing act

Although data released from the early part of the quarter has confirmed the historic fall in economic growth, more

recent figures suggest consumers and businesses are slowly returning to normal. Investors’ optimism

regarding the full reopening of economies and the potential for a vaccine will be tempered by concerns

regarding a second spike. Governments must balance the withdrawal of fiscal support with the health of both

their economies and peoples.

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-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Global US Euro Area UK Emerging Asia

2019 2020e 2021e



Keeping up to speed with our research



Appendix – Historical PerformanceDiscrete 5-year performance of gilts and equities across regions

Market 2020

(to Jun) 2019 2018 2017 2016 2015

Gilts (£) 9.7 7.1 0.5 2.0 10.7 0.5

UK (£) -17.7 16.4 -8.8 11.7 19.2 -2.2

USA ($) -2.5 30.9 -5.0 21.2 10.9 0.7

Europe ex UK (€) -9.2 27.1 -10.9 11.4 2.4 10.7

Emerging Markets (£) -3.3 13.9 -9.3 25.4 32.6 -10.0 Past performance is not a reliable indicator of future performance. The value of investments and any income can fall.

Index Source: Bloomberg. Indices used: Bloomberg Barclays Sterling Gilts, MSCI USA Net Total Return, MSCI UK Net Total

Return, MSCI Europe ex UK Net Total Return, MSCI Emerging Markets Net Total Return (GBP). All returns include income

reinvested and are in local currency apart from MSCI Emerging Markets which is in £.

Discrete 5-year performance for the Barclays Charity Fund

2020

(to Jun) 2019 2018 2017 2016 2015

Portfolio (net) -7.3% 17.6% -4.1% 11.7% 17.6% -0.4%

ARC Steady Growth -5.1% 15.6% -4.9% 9.4% 12.6% 2.1%

relative -2.2% 2.0% 0.8% 2.2% 5.1% -2.5%

Past performance is not a reliable indicator of future performance. The value of investments and any income can fall. Performance data is net of fees for the Fund.

ARC Further information The Manager compares the performance of the Trust against the ARC Sterling Steady Growth ACI (the “Index”), one of the ARC Charity Indices. The Trust is not constrained to, or managed in line with, the Index and it is relevant only for the purposes of comparing the Trust’s performance. ARC Charity Indices are specifically designed to be used by charity trustees and advisers in assessing the performance of discretionary charity portfolios. The Manager compares performance of the Trust with the Index to help investors understand how it has performed versus an appropriate peer group. The Index is used because portfolios included in it have comparable risk characteristics. The Index is compiled by taking the performance of each portfolio submitted by the data contributors where the historic volatility of that portfolio has been in the range of 60–80% of that experienced by UK equity markets.



Disclaimer and Risk Considerations

Risk Factors

Investments of this type will be exposed to a variety of risk, including but not limited to: Investments Long Term: Investments should be regarded as long term and are not suitable for money which may

be needed in the short term, you should always have a sufficient cash reserve.

High Yield Bonds: The fund invests in high yield bonds. High yield bonds carry a greater risk of default than investment grade bonds, and economic conditions and interest rate movements will have a greater effect on their price. Income levels may not be achieved and the income provided may vary.

Value of Investments: The value of investments, and any income, can fall as well as rise, so you could get back less than you invested. Neither capital nor income is guaranteed.

Disclaimer

This document has been issued and approved by Barclays Bank UK PLC. Where information in this document has been obtained from third-parties, the sources are believed to be reliable but we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This document does not constitute a prospectus, offer, invitation or solicitation to buy or sell securities and is not intended to provide the sole basis for any evaluation of the securities or any

other instrument, which may be discussed in it. Any estimates and opinions included in this document constitute our judgement as of the date of the document and may be subject to change without notice. Past performance is not an

indication of future performance. The value of investments, and the income from them, can fall as well as rise and you may get back less than you invested. This document is not a personal recommendation and you should consider whether you

can rely upon any opinion or statement contained in this document without seeking further advice tailored for your own circumstances. This document is confidential. It may not be reproduced or disclosed (in whole or in part) to any other

person without our prior written permission. Law or regulation in certain countries may restrict the manner of distribution of this document and persons who come into possession of this document are required to inform themselves of and observe

such restrictions. We or our affiliates may have acted upon or have made use of material in this document prior to its publication.

You should seek advice concerning any impact that any investment described in this document may have on your tax position from your own tax adviser. You have sole responsibility for the management of your tax and legal affairs including making any applicable filings and payments and complying with any applicable laws and regulations. We have not and will not provide you with tax or legal advice and recommend that you obtain your own independent tax and legal advice tailored

to your individual circumstances.

Barclays offers banking, wealth and investment products and services to its clients through Barclays Bank UK PLC, and its

subsidiary companies. Barclays Bank UK PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No. 759676). Registered

in England. Registered No. 9740322. Registered Office: 1 Churchill Place, London E14 5HP.Barclays Investment Solutions Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange and

NEX. Registered in England. Registered No. 02752982. Registered Office: 1 Churchill Place, London E14 5HP. © 2018 Barclays Bank PLC (All rights reserved).

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