Charity Investment Forum 2015 - Diagnosis...

This year’s Charity Investment Forum was attended by almost three hundred representatives of charities from across the broad spectrum of the sector. It was held at the Royal College of Physicians and so inevitably the occasion had a medical theme with the strap line ‘Diagnosis’.

A healthcheck

The first half of our morning was devoted to economics and the outlook for markets.  Richard Jeffrey, our Chief Investment Officer, started the formal presentations by providing a “Health Check” on the global economy and its implications for charities. He admitted that these were testing times for investors, citing such issues as Greece, China, commodity prices and the likelihood of interest rate hikes in the United States.

He warned that global economic growth is unlikely to return to pre-financial crisis levels. In the UK, there was unparalleled 3% p.a. growth for fifteen years pre crisis. In future this figure is likely to be closer to 2.25% p.a., so that in the dips there will be less of a cushion to maintain the ‘feel-good’ factor and keep consumers spending. This said, he does not feel that the UK will fall back into recession imminently.  He also believes that interest rates will be increased in the spring next year, following an anticipated move by the US Federal Reserve.

The heart of the matter

Richard Buxton, Manager of the Old Mutual UK Alpha Fund, reflected on the consequences for the UK equity market. His view is that, using an analogy in keeping with the medical surroundings, the post-trauma scars will last for years and Britain is seven years into a healing process that could take up to twenty years. However, he remains positive in his view of UK equities, believing that valuations in some areas of the market are “compelling”.  Interestingly, he is convinced that there is no need to fear the referendum on continuing membership of the Eurozone and stated forcefully that there is next to no chance of a ‘Brexit’ in part because Germany would not want it.

Under the skin

Absolute return strategies were then discussed by Matthew Smith of Majedie Asset Management, manager of their Tortoise Fund. He started rather alarmingly by stating that if a doctor had the same success rate as the average fund manager, he would kill a third of his patients! The challenge in achieving cash plus returns, no matter what the market environment, is very different to other forms of equity fund management. He looks to achieve this through identifying “unloved”, out of favour stocks in which to invest, while shorting stocks that look overvalued. Matthew prefers large cap, highly liquid stocks so that, if necessary, he can exit swiftly. His philosophy is to accept small losses if his investment decision is looking wrong, while to run for larger gains those that are doing well.

The backbone

The second half of our morning focussed on governance. As good governance is absolutely vital for any well-run charity, it was no surprise that Andrew Hind’s presentation was entitled ‘The Backbone’. Andrew is Professor of Charity Governance and Finance at the Cass Business School having previously been Chief Executive of the Charity Commission. He sought to identify best governance practice and examined the relationship between trustees and the executive, reiterating the importance of mutual respect, working together for the benefit of the charity.

The challenges of board delegation to sub-committees was highlighted.  It is the legal responsibility of the trustees to oversee the charity whether or not they attend meetings or sit on a particular committee. Multiple sub-committees dilute the ability of the trustees to monitor and as such Andrew suggested a maximum of four sub-committees of the main board.  As an extension of this, he recommended that every committee should contain a “lay member” who is not an expert in the field.  It would be their responsibility to do a ‘sense check’ and be prepared to ask the silly question.

A prescription

Kate Rogers, Head of Policy at Cazenove Charities, brought the formal part of the forum to a close, talking through a thought process for trustees considering their charity investment policy, drawing from a number of reports she has written or co-written on investment governance.  She was at pains to stress that there is no ‘Holy Grail’ or right answer.  Each charity has different aims, objectives, levels of expenditure and time horizons.   Key dilemmas in determining the investment policy include finding the right balance between spending now and saving for the future and whether to reflect the charity aims in the investment assets. 

The successful event finished with a fascinating talk from Lord Robert Winston. The content of his presentation was very wide ranging; and it was interesting to hear from a pioneer working on the frontiers of medical science his view that, for every upside such as the benefits of the internet, there is a downside like cyberterrorism. Perhaps, as an encouragement for us all, he added that the path to success was seldom smooth.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Registered Office at 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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Achieving your charity's investment objectives takes time and thought. To find out how we can help you please contact:

James Brennan

James Brennan

Portfolio Director