Our Investment Consultancy provides guidance on key investment considerations for charities, covering topics such as investment options, trustee obligations, risk management and the role of investment consultants.

Can charities invest money?

Yes. Unless your governing document restricts it, trustees have a statutory power to invest their charity’s assets. However, they must act in their charity’s best interests, considering factors such as financial return and alignment with the charity’s purposes. These considerations should include decisions around objectives, risk, return, ethical concerns, and timescales.

What investment options do charities have?

There are a wide range of options for both financial investments (those with an objective of a financial return) and social investments (to provide direct achievement of the charity’s purposes in addition to a financial return). Examples of financial investments include land and property, cash deposits, equities and bonds. Examples of social investments include loans and impact investing. Trustees are expected to consider the suitability and diversification of any investments.

Who provides charity investment management?

There are a significant number of firms that can provide charity investment management in the UK including financial advisers, wealth managers, specialist investment firms and banks. The right manager for your charity depends on your objectives, approach to risk, time horizon, charitable purposes, and other policies that may be set out in your Investment Policy Statement (IPS). Trustees are expected to conduct due diligence and regularly and independently review their investment managers to ensure alignment with their charity’s objectives and legal obligations.

What do investment consultants do?

Services can cover a wide range of areas. Our investment consultants help their clients with investment strategy, approaches to risk, investment manager due diligence and selection, cash and treasury advice, performance reporting, and ESG reviews. These regular independent reviews allow Trustees to meet their duties.

Which are the best charity investment funds?

The best investment fund for your charity will depend on your charity’s objectives and circumstances. There is a wide range of both fund and bespoke portfolio options. Factors such as risk level, time horizon for investment, charitable purposes, ESG considerations, and income needs could affect which solution may be best.

Which are the best charity bank accounts?

The best bank accounts for your charity are likely to depend on your charity’s structure, objectives and circumstances. There are a range of both current and deposit account options for charities but not all charities will be able to open accounts with all providers. Factors such as deposit amounts, credit risk, protection, interest rates, accessibility, charges, and administration requirements can all affect which accounts may be best for your charity.

What is an Investment Policy Statement?

An Investment Policy Statement (IPS) is a formal document that details the guidelines and objectives governing the management of an investment portfolio. Charities structured as a trust or an unincorporated association that appoint a discretionary investment manager are legally required to have a written IPS. Charities structured as a company are not legally required to have a written IPS but are expected to. The IPS may cover areas such as return objectives, risk tolerances, asset allocation, investment guidelines and restrictions, ethical considerations, and performance monitoring and reporting.

What are trustees’ obligations when investing charity assets?

As well as certain expectations, Trustees also have legal obligations when investing charity assets. In summary, the expectations and requirements for financial investments are:

• Acting to further your charity’s purposes by making decisions in the best interests of your charity.

• Acting with reasonable care and skill.

• Keeping records of investment decisions.

• Considering whether investments are suitable and sufficiently diversified.

• Taking advice from someone experienced in investment matters.

• Regularly reviewing your charity’s investments.

• Reporting on your investments.

How much risk can charities take with their investments?

There are no set requirements when it comes to investment risk. Trustees must be able to satisfy themselves that the risk taken with their charity’s investments is appropriate and in line with the best interests of the charity. This will depend on factors such as the objectives of the charity and its investments, the timescale for investments, income needs and the Trustees’ attitude to risk. There are also likely to be a range of different risks to consider, including:

• Capital risk.

• Inflation risk.

• Market risk.

• ESG risk.

• Reputational risk.

Trustees are expected to ‘take professional advice, where appropriate, on your charity’s attitude to risk, and the types of risk that may be relevant to your charity’.

Buzzacott Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FCA). The FCA does not regulate some forms of investment consultancy. Some investment consultancy services may not be available to existing Buzzacott audit clients.