Charity finances through a pandemic

A three minute guide for trustees

Navigating a winding road
Ajay Johal
Investment Manager

The coronavirus pandemic has driven up demand for the services of charities across the UK. It has slammed the door shut on charities’ vital fundraising efforts. And it has put pressure on charity investment portfolios.

To help navigate these uncertain times, here is a quick guide for trustees, stewards and advisors in the third sector.

Ruffer manages over £1.5 billion in assets for UK charities, at 30 June 2020. With this comes a profound responsibility to help our charity clients preserve and grow the value of their capital, whatever happens in financial markets.


Things to consider

Work out committed expenses over the next two to three years. This will help provide a clearer picture, and allow you to identify potential shortfalls before they arrive.

Factor in deficits in donor income as well as losses from cancelled fundraising events.

Where possible, try to build up cash reserves and ensure they are easily accessible.

Questions to ask

Based on your forecasted requirements, do you have an appropriate level of liquidity available now?

If not, how will you raise this cash buffer?

Is the cash readily available from your investment portfolio, or is there a penalty for accessing it early?


Things to consider

An investment policy drafted pre-covid may not be the right policy in a post-covid world.

Consider any restrictions in place and whether they can be adapted. For example, can you shift from only withdrawing income from the portfolio to withdrawing a combination of income and capital?

Have a look at the asset allocation, is it appropriate for a more volatile and inflationary environment.

Questions to ask

When did you last review the investment policy?

With interest rates close to zero, investors may need to take on more risk to generate the same yield from their portfolios. Rather than allocating to riskier assets, could you consider a total return approach (focused on the combined growth of income and capital) to meet drawdown requirements?

Does the investment policy match the ethos of the charity, from an ethical and spending standpoint?

If you have a stated benchmark, is it still relevant now or should it be adapted?


Things to consider

Now is not the time to give up on ESG in your investment portfolio.

An integrated ESG approach to research shouldn't be an afterthought, ensure your investment manager feels the same.

Questions to ask

How does your investment manager think about ESG – is it integrated in the investment process or peripheral?

How can they help your investment portfolio align more closely with your charitable aims?

How has your investment management company responded during this crisis?


Things to consider

In difficult periods such as this, communication amongst trustees is key. Keeping the team up to date and in sync can help when executing strategies and plans.

Communication with your investment manager is crucial as well.

Remember, the investment manager works for you. Request more frequent updates, commentary, reporting if that will help boost confidence amongst trustees.

Questions to ask

What is the investment outlook from here – does the assumed level of risk within your portfolio remain appropriate?

How has covid-19 impacted the income produced from the portfolio?

How does your portfolio react to different environments – how will it fare if inflation picks up and erodes asset values?

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Past performance is not a guide to future performance. The value of investments and the income derived therefrom can decrease as well as increase and you may not get back the full amount originally invested. Ruffer performance is shown after deduction of all fees and management charges, and on the basis of income being reinvested. The value of overseas investments will be influenced by the rate of exchange.

The views expressed in this article are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument, including interests in any of Ruffer’s funds. The information contained in the article is fact based and does not constitute investment research, investment advice or a personal recommendation, and should not be used as the basis for any investment decision. This document does not take account of any potential investor’s investment objectives, particular needs or financial situation. This document reflects Ruffer’s opinions at the date of publication only, the opinions are subject to change without notice and Ruffer shall bear no responsibility for the opinions offered. Read the full disclaimer.

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