Heather Lamont: A simple approach is often best, and could save time and money for your organisation

The investment markets are often portrayed as complex and a bit scary. Investment discussions can be jargon-ridden, and the markets typically make the news only when investors are suffering.

With headlines like “billions wiped off the price of shares” or “FTSE falls 10% in a year” it’s not surprising that some trustees assume that investments simply aren’t right for their charity.

For many of these the unfortunate result is that over the long term they miss out on the income and growth they could be generating, instead of losing real spending power by holding excess cash balances for years on end.

Meanwhile in charities which do have long-term investment portfolios, there’s often a sub-group of trustees and experts who rather enjoy the investment-speak. That can work well if they are simply acting as the eyes and ears of the other trustees, scrutinising the detail of how the portfolio is serving the charity’s purposes. But sometimes, there’s a temptation to have an unnecessarily complex portfolio, or more transactions and investment activity, to give the committee and the portfolio manager plenty to talk about – without obviously delivering better returns or risk control for the charity. The result can be unnecessary costs in both time and money.

It doesn’t have to be this way. If the trustees are agreed on why they want to invest - typically, to generate a decent income stream and/or to see the growth which will help their long term reserves stay ahead of inflation – then they’ll be joining many others who are already doing just that.

Charities with similar objectives realised many years ago that by pooling their resources they could access the sort of well diversified, professionally managed portfolio that would help them meet their obligations as trustees.

So the first port of call for charities making an initial allocation to long term investments is usually the well-established route of a specialist charity fund such as a common investment fund. This can give you access to an all-round portfolio targeting the objectives that you share with existing investors, at a low cost and with minimal administration.

Published data make it easy to see how your chosen fund is performing compared with others, so you can keep it under review.

Meanwhile, recognising that many charities want their investments to reflect their mission and values, there’s a growing range of funds with different ethical policies to suit most organisations.

Increasingly, larger organisations – including those with multi-million pound portfolios, and those with many years of investment experience – are also realising that pooled funds aren’t just for the little guys.

If the objectives and ethical policy are a good match for your investment policy, and you can see that performance has been strong, why wouldn’t you want to access the right portfolio through a route that saves your charity’s resources and allows all the trustees to concentrate on the bigger picture?

Heather Lamont is a client investment director at CCLA.

CCLA events at The Gathering 2019:

Charity Investment – an introduction Wednesday 20 Feb, 11.45am, Alsh Suite 1

Economics and investment markets – update for charity investors Wednesday 2pm, Alsh Suite 1

Aligning your investment policy with your organisation’s strategy Thursday 11.15am, Dochart Suite