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Having joined Harris Allday this last autumn as Head of Charities and Philanthropy – Rupert Cecil will be writing a short note on a regular basis designed specifically for charities.

Here is his short note:

 recently met with the trustees of a charity who asked me to review their investments, something that I am always happy to do – pro bono of course!

They had about £1.6 million, a third of which was invested in gilts and the remainder in a few charity specific funds. I explained that I wasn’t here to pitch to them and I am a strong believer in “if it ain’t broke don’t fix it”. I was told by one of the older trustees who was about to step down that the asset allocation had been determined a few years ago by an actuary “who knew what he was doing” and the holdings have remained unchanged since then.

It hadn’t done badly, but certainly could have performed much better and the trustees were uncertain about what if any changes should now be made. I said I would be delighted to help going forward allowing them to focus on the day to day needs and objectives of the charity.

I had a think and asked myself what they were actually missing out on? Well as a trustee myself, I believe my principal duty is to further the purpose of the charity. To me this includes making the most of your investment decisions. With this in mind there were a few questions I think charity trustees should ask to determine whether they want to fly their own plane or to employ a pilot to do so:

• Is there sufficient investment knowledge amongst the trustees to engage in the increasingly complex world of investments – I am not advocating that charities should have complicated portfolios, far from it, but it is important they have sufficient knowledge of what is owned.
• Do you have the time or inclination to pick and manage your investments, making the decision when to sell or replace holdings? It goes without saying that this is both a significant responsibility and a full-time job.
• Recent events (Covid, the war in the Ukraine, rising inflation etc) has meant that investors have had to be nimble as the world changes and new solutions are required (protecting against inflation, ESG, sustainable Investing etc). Can you be this flexible?
• How are you measuring your returns? In the case of the above charity all the investments were on different platforms, with different benchmarks – It was impossible for the trustees to see how they were doing relative to other charities.
• Your ultimate objective is the maximization of investment returns and the minimization of risk – is this something you feel you have achieved?

In this example - Looking first at the Gilt holdings, we were able to significantly improve the returns by switching part of the exposure into some high-quality corporate bonds. In addition, with the funds they held we analyzed how they had performed relative to others and made switches from the whole of the market.

If you are a trustee of a charity that is making its own investment decisions, we would be delighted to look at your investments and to help you consider how you could improve the returns and further the purpose of your charity.

This should not be construed as investment advice; each charity’s circumstances are unique and should be considered on an individual basis.