Charities 'missing out' by not investing abroad

Charities should move investments abroad during the downturn in the UK economy, a charity investment specialist has said.

"Eleven of the 12 companies that reward investors with a return of more than 3.5 per cent are outside the UK," James Bevan, chief investment officer at not-for-profit investor CCLA, told Third Sector. "The UK economy is in serious trouble, but lots of the rest of the world is doing rather well.

"Emerging markets are blazing away. They're generating wealth like billy-o."

He said that charities were often rooted in the UK investment markets because of inbuilt prejudices, but they should look beyond their traditions.

"If you want to stay in cash or bonds because you expect to spend money soon, that makes sense," he said. "But for long-term endowments, you should diversify abroad - without question. There are very few free lunches in the world of investment, but diversification is one of them."

The pound, already at a low ebb against the euro, could also collapse against other currencies, making holders of investments in those countries much richer, he said.

Charities could also use overseas investments to increase their ethical commitments, he added.

"There are global opportunities to invest in companies that genuinely do good things," he said. "If you want to have investments that help people, many of the best opportunities are abroad.

"The church in Sweden has put money directly into Africa. Other charities could easily follow suit."

Richard Maitland, head of charities at Sarasin & Partners, agreed that diversification was important.

"Increasingly, certain industries are listing in specific countries," he said. "The UK has very high exposure to financial, mineral and pharmaceutical stocks, for instance, but very few world class technology stocks."

He said that charities were lagging behind some other investors.

"A lot of institutional investors with UK liabilities are already investing almost entirely globally," he said. "Most charities have not embraced globalisation with such enthusiasm."

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