Underperforming investments 'cost sector £750m'

Underperforming charity investments could have cost the sector £750m in income over the past decade, new research on charity investment practices has found.

Investment Matters, by sector academic Beth Breeze for the Institute for Philanthropy, found that the voluntary sector’s income would have been £750m higher if investment performance had been 2 per cent better over the past 10 years.

The report, which was based on information on investment management processes and performance from charities with endowments of more than £10m, concludes that charity investments have underperformed but that many charities are not as concerned as they might be.

The results show a wide spread of annualised rates of return over the past five years, from 22.1 per cent at one charity to 3.1 per cent at another. The median performance of 8.7 per cent shows that UK charities underperformed compared with their counterparts in the US by 3.7 percentage points.

Despite the wide performance range, 96 per cent of poll respondents were satisfied with recent investment returns.

“Certain UK charities, both large and small, rank among the best in the world, but in many cases returns are poor – and yet a very high degree of satisfaction is expressed in the survey responses,” writes Nicholas Ferguson, chair of the Institute for Philanthropy, in the report’s foreword. “It is clearly time for a debate.”

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