Research shows charities are looking to boost return
Charities' investment risk appetite is set to increase over the next two years as they look to boost returns and put rising funds to work, new research claims.
A study carried out by wealth manager Rathbones alongside major charities worth a collective £4.074billion of stock market related investments shows 81% expect the investment risk appetite to increase with 25% expecting a dramatic rise in risk appetite.
That builds on a growing acceptance of the need to increase investment risk appetite at charities – around 85% say their investment risk appetite has increased over the past two years.
Just 14% say their risk appetite dropped in the past two years.
Rathbones’ study found the key reason driving increased risk appetite over the next two years is that charities have more funds to invest.
Around two-thirds (67%) cited that as a reason to accept more risk while 56% said they needed to find ways to generate stronger returns.
But among the nearly one in five (18%) of senior charity executives who say their organisation’s risk appetite will decrease in the next two years there are concerns about a possible market correction while others say the growth in ESG investing is reducing the investments they can focus on.
Around 61% of those who say their investment risk appetite will fall believe a market correction is on the way while the same number point to the influence of ESG on risk appetite. Around 56% believe markets will become more volatile.
Up to 44% say their risk appetite will decrease because of growing scrutiny of their investment strategy while nearly a third (33%) say they have to focus on income rather than growth.
Andy Pitt, head of charities at Rathbones said: “Charity finances have been under huge pressure with rising demand for their services running into a fall in donations and a squeeze on investment returns from volatility and weak performance in UK markets.
“An increased risk appetite is understandable given the recent experience and it will be positive if it is managed in the right way. Managing risk allows charities to expose their portfolio to assets that may generate a return above the traditionally perceived lower-risk assets such as cash. And it does so in a way that helps them meet their financial objectives while protecting the interests of the charity.
“Trustees should be prepared to take on some investment risk – simply sitting on cash has its risks too and they are likely to need to invest in other asset classes to meet a charity's objectives. However, trustees must be satisfied that the overall level of risk they are taking is right for their charity and its beneficiaries.”
Rathbones is responsible for £9.4 billion in funds under management for more than 3,000 charities.
Charities have entrusted their investments with Rathbones for over 100 years, thanks to its dedicated investment managers who are accountable for every aspect of a charity’s portfolio which range in value from £10,000 to more than £100 million.
The Rathbones team, many of whom are trustees in their own right, can help navigate the complexities of charitable investing as well as offer timely advice on changes in legislation and regulation.
The team manage portfolios for sustained, long-term growth to help charities achieve their charitable goals.
