Charites should invest cash instead of letting it become stagnant

UK charities are sitting on an estimated £250 billion in assets alongside £31 billion in cash.

Analysis of 2022 data from The Charity Commission1 highlights that a significant portion of charity assets are potentially sitting idle when they could be put to better use.

The findings from Broadstone, an independent consultancy, showed that UK charities with an annual income of at least £0.5 million, owned - in total - £250 billion in assets, of which 13%, or £31 billion, was held in cash.

Analysis revealed that approximately 58% of the 12,973 UK charities sampled did not hold any long term investments.

This means that more than half of the largest UK charities only hold cash-like assets and fixed assets such as land, buildings, equipment and vehicles.

With 59% (£147 billion) of the assets held by these 12,973 charities deemed unrestricted – i.e. assets that can be invested as the trustees see fit to benefit their charitable purpose – a large proportion of charities may be unnecessarily foregoing the returns that can be accrued by investing their assets.

Assuming this £31 billion of cash was held in current accounts for a year - not accruing interest - Broadstone’s analysis reveals that the charity sector could have benefited from up to £1.5 billion of investment returns, had this money been held in a typical Money Market Fund offering returns in line with market rates of interest.

This is assuming a 5% return on £31bn of assets over a year.

Commenting on the findings, Rachel Titchen, charities and investment director at Broadstone, said: “Most charities see cash as the safest and most reliable financial vehicle to store their assets, but in reality, it may be holding them back from achieving their charitable objectives.

“Recent inflation levels, geopolitical shocks, and currency fluctuations have all eroded the real value of liquid assets like cash, slowing down the progress of charities and hindering their ability to fund their missions – especially those with un-tailored and inflexible strategies in place to achieve their goals.

“Investing doesn’t have to be daunting or high-risk. In fact, there are a number of secure investment vehicles that are practical, uncomplicated, likely to provide a good return, and crucially – ‘mission aligned’.

“At its core, investing is a tool to be used by trustees to drive forward their objectives. A decision not to invest assets is a decision that needs to be documented within an investment policy.

“We urge charities who are holding excessive cash to speak to an investment consultant to consider whether training for the finance team and finance sub-committee could be helpful.

“Using an investment consultant can give you the expertise you need to make investment decisions, especially when that expertise isn’t currently available on the board or in-house.

“Charities should feel empowered by their assets. We’d love to see trustees making the most of market opportunities to further their missions.”