Investing for the first time

Kate Rogers, Portfolio Director and Head of Policy at Cazenove Charities shares her thoughts on issues faced by the charity sector in Third Sector Magazine every other month. 

The investment world can seem like a complicated place. We pepper all of our communications with jargon, some technical like duration and volatility (both measures of risk), and some to describe how we are feeling like bullish and bearish (positive and negative), when all could be described in plain English if we really wanted to. It is the same in many industries. I've just become a school governor and the number of acronyms (that mean nothing to me) is mind boggling. Perhaps we do it for ease of communication, to put up barriers to entry or to help identify members of the same tribe. The result, for investing charities, can be baffling. So where to begin if you are investing for the first time. 

First let me describe two key terms:

Return is the gain (or loss) that you make on an investment.  This might come in the form of income (interest from cash, coupons from bonds, dividends from equities, rent from property) or capital, the increase in value of your investment.

Risk is most often defined as the volatility of an investment, or how much and frequently the price goes up and down. The more volatile, in theory, the more risky. 

Return and risk are linked. In order to get a higher return you would expect to take a higher risk.  Sadly that doesn't mean if you take more risk you will always get a higher return.

The starting point should always be your own charity’s financial strategy, why are you holding investment assets and what do you hope to achieve?  This should be expressed as a written investment policy and you may find the Charity Investors' Group guide helpful (link). Thinking though these three questions is a useful place to begin:

1. What and how long is the money there for?

Your assets may be your reserves, might therefore be needed at short notice and should be invested in low risk (and low return) assets. Or they may be long term assets held to generate an income, in which case they should grow with inflation to preserve their value. It should be remembered that your assets are there to support you deliver your charitable objects, not for speculative gain or over cautious cash hoarding. Balancing 'fear' and 'greed' is the challenge.

2. What are the best assets to invest in?

This will depend on your answer to the first question. Lower risk assets such as cash and bonds for short term funds; higher risk, income generating assets linked to inflation such as equities and property for longer term funds. You may have expertise on your finance or investment committee, otherwise investment managers, like me, advisers or consultants can help to find the right asset mix for each charity.  There is no single 'answer', it will depend on your charity's circumstances and preferences.

3. How do we manage the investments?

This will depend on a number of things, including the expertise within your charity and the size of the investment pot. For most charities the answer will be to invest in a fund (or number of funds) that matches your investment objective. For the fortunate few with a significant balance to invest, there is the possibility of investing directly in the assets, although many still choose to pool their assets with others in funds.

Although it might seem daunting, charities should not be put off thinking about their investment options.  Improving the financial return on the charity asset base will not only enhance organisational stability, but most importantly improve the ability of your charity to fulfil your mission.

Jargon buster
Gilts = government bonds
Fixed interest = bonds
Equities = stocks = shares
Yield = income (as a percentage of the value)

A version of this article first appeared in Third Sector on 23 October 2014. For this and other articles by Kate Rogers, visit

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. 

Contact Cazenove Charities

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