Charities have lost up to £8.6 billion since the beginning of last year because of falls in the value of their equity investments, according to research by Close Wealth Management.
The fund management firm says that charities and voluntary organisations had £29.24 billion in equity investments in January 2002, but since then the FTSE All-Share Index has fallen by 31 per cent and the FTSE World Index by 25 per cent.
"Charities are coming under huge pressure," said Martin Smith, chief executive of Close. "Their overhead costs are rising dramatically with insurance premiums, for example, increasing by as much as 300 per cent. Donations from individuals and companies have fallen and investments, on which charities rely for around one-fifth of their total earnings, are being hit by depressed stock markets."
He said that charities were being forced to put projects on hold because of the "double whammy" of declining donations and falling investment returns.
According to research from the stock market performance analysts the WM Company, the value of charities' UK equity investments has nearly halved in the past four years. Figures from the company's annual review, due to be published next month, reveal that the sector's equity investments dropped to just £12.6 billion at the end of 2002 from £23.3 billion at the end of 1998.
Smith advised charities to consider whether they had enough fixed income assets in their existing portfolio.