Most charities plan to shift more capital toward active investments in volatile markets and move their portfolios toward equities and alternatives over the next two years, according to interviews with senior charity executives conducted for Rathbones, a leading UK wealth and asset management group.
The targeted study of 100 UK charity board directors, finance directors, investment managers and investment directors with a collective £3.7 billion of stock market related investments found that 87% expect their active investment allocations to increase, either slightly (49%) or dramatically (38%) over the next three years.
When asked why, 71% of survey respondents said because active fund managers have better insight than ever before to be able to deliver strong, market-beating returns, thanks to improved technology. Other reasons charities gave for the shift to active investments were that these tend to perform better in volatile markets (55%), greater innovation in the active management sector (49%), active strategies becoming more transparent (48%) and fees for active investments becoming more competitive (41%).
Charities already have large active portfolios, the research found, with 50% of charity executives surveyed reporting 25-50% of their investment portfolio being active, and 26% say it is between 50-75%.
Just over a third (35%) of charity executives surveyed said between 10-25% of their portfolios are in passive strategies. Four out of 10 (42%) said they have between 25-50% of their portfolios in passive investments and 19% have between 50-75%.
Andy Pitt, Head of Charities at Rathbones, said:
“It is encouraging to see charities becoming increasingly confident about the role that active investment can play in supporting their long-term goals. With better technology and data giving managers clearer insights, many feel active strategies can now deliver stronger returns while also helping them navigate uncertain markets. At such a challenging time for charities, this isn’t just about numbers on a balance sheet, it’s about protecting the resources they rely on and growing them in a way that allows their work to reach further and last longer.”
The study also identified some key changes in investment allocations for UK charities:
Charity executives said the reasons for predicted changes in allocations were to be better at matching assets and liabilities (56%), increase capital growth (56%), increase income (53%) and to preserve capital (37%).
Rathbones is responsible for £9.3 billion in funds under management for more than 3,000 charities. Charities have entrusted their investments with Rathbones for over 100 years, thanks to its dedicated investment managers who are accountable for every aspect of a charity’s portfolio which range in value from £10,000 to more than £100 million.
The Rathbones team, many of whom are trustees in their own right, can help navigate the complexities of charitable investing as well as offer timely advice on changes in legislation and regulation. The team manage portfolios for sustained, long-term growth to help charities achieve their charitable goals.
