The next year will be tougher for charity investment than the last, delegates at the Merrill Lynch Charity Investment Conference were told last week.
Ewen Cameron Watt, managing director of Merrill Lynch Investment Managers, warned charities: "The market is not going to give you as good a ride over the coming 12 months."
According to the most recent figures from the WM Company, charity funds have grown by 2.1 per cent over the past six months. But growth has slowed over the last quarter with charities posting a return of 1.4 per cent.
Cameron Watt argued that while the world economy would grow more slowly, it would not dip into recession over the next year or so.
He added that government bonds were not a good investment for charities currently: "The bond market is only good value if you feel that we are heading to recession."
He also questioned the current popularity of hedge funds. "There is a great myth about hedge funds, that they are always going to produce exceptional returns."
According to figures from Bloomberg, only 575 out of 4,000 hedge funds, produced returns of more than 10 per cent last year. Hedge funds' advantage over cash was in gradual decline, he said.
Cameron Watt also predicted that al-Qaeda would attempt to disrupt economic activity and investor confidence, but "historically this kind of thing only has a short-term impact on the stock market and could be more generally an opportunity rather than a threat".