Charities are choosing to keep assets in cash rather than investing in equities because of heavy stock market losses, according to specialist charity-sector banks.
The CAF Gold account has "grown phenomenally
over the past year while investments have slowed, said Tracey Reddings, the Charities Aid Foundation's director of banking and investment.
"The CAF experience during the past six months is that although charities are not diluting their investments, they appear to be investing at a slower rate than our previous experience has shown,
said Reddings. "Over the same period we have seen a significant increase in the value of cash assets held, which may indicate that charities are choosing to keep assets liquid."
Despite low interest rates, bank accounts rather than stock market investments seem to be the most popular destination for charities' new money. Nigel Price, corporate relationship manager at Unity Trust Bank, which has a 50-50 split between trade unions and charity clients, reports "an out of the ordinary
increase in deposits over the past quarter. "This is not normal business growth. It suggests a shift out of equities and into liquid assets,
But David Bailey, vice-president of charities at Deutsche Asset Management, said the inflow into equity investments by charities had not "eased discernibly".
"Those charities that are sitting on cash piles are in a holding pattern and will probably enter the equities market later in the year when the threat of an Iraqi war recedes and the US economy takes a turn for the better,
Reddings warned that charities with swelling bank accounts needed to be aware of the increased risk of fraud. "Keeping larger sums liquid in bank accounts could give rise to operational risk issues,