How to write an effective charity investment policy

A written investment policy is a crucial document for charities to set out what they are aiming to achieve, says Kate Rogers of Schroders

Kate Rogers
Kate Rogers

I have spent the past few months reading charity investment policy statements in my spare time. Not the most scintillating dinner party chat, you might think, but it has been an interesting exercise - if only to understand the variation in our sector.

I found a lot of differences. This is partly because all charities are different and their investment policies reflect this. But policies also differ in superficial ways such as layout, structure and, most notably, length.

Some charities' investment policy statements are very comprehensive, covering governance issues, other relevant policies such as reserves or conflict of interest policies, and specific investment guidelines and restrictions. On the other hand, I saw a very well thought-out policy statement written by a large endowment that ran to less than a side of A4 paper.

You might politely ask why on earth I would be spending my leisure time with my nose buried in investment policy documents.

As chair of the Charity Investors' Group and in my day job at Schroders Charities, I'm often asked for a model or sample investment policy statement. Following the release of the new charity commission guidance on investment in October last year, we decided to partner with the Charity Finance Group to construct that very thing.

Writing Your Charity's Investment Policy - a Guide was launched recently and is available at www.charityinvestorsgroup.org.uk. I hope that this guide will be of help to charities. We are delighted that the Charity Commission has deemed it so useful that it guides trustees to it from its online investment guidance.

To put this document together, we began by identifying the regulatory requirements set out in the commission's guidance. The next stage was to build an appropriate framework to act as a template for a written investment policy. The guide includes the type of questions that you should be asking yourself, such as the importance of your investment assets to your overall charity finances, their role on your balance sheet and the return objectives and risks that you have considered.

In order to show how this template might be used in practice, we have included six examples of written investment policies. These are designed to suit different types of charity and investment approaches and include a foundation, an operating charity, a permanent endowment, a fundraising charity holding only cash, a small charitable trust and a large foundation with programme-related investments alongside the main financial investment portfolio. All are fictional, and we recognise that we have not represented all types of investment approaches, but we do hope that the end result is useful.

Importantly, the guide is not designed to be an additional burden for trustees and should not be viewed as a suggestion to rewrite existing policies that are fit for purpose.

A written investment policy is a crucial document for charities - it sets out what your charity is aiming to achieve and provides a framework for making investment decisions. This will help trustees to manage your resources and demonstrate good governance. It is also a legal requirement for charities that outsource investment management, and should provide important information for your investment manager.

I would welcome any feedback on the guide and examples provided within it.

Kate Rogers is client director at Schroders

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