Kate Rogers: A sensible list of aspirations from the Wellcome Trust

Those who look after charity investment pots must watch out for risks, diversify and avoid getting caught out with cash flow

Kate Rogers shares lessons for investors from the Wellcome Trust
Kate Rogers shares lessons for investors from the Wellcome Trust

Last month, to mark the launch of our enlarged charity investment team, we hosted the inaugural Cazenove Charities lecture, gathering at the Tate Modern to hear Danny Truell's thoughts on managing charity investments. For those of you who don't know Danny, he is the rather inspiring and scarily intelligent chief investment officer of the Wellcome Trust, the charity that funds research into improving human and animal health. He is responsible for an eye-watering £17bn of assets.

But what relevance would his thoughts on investments have to us mere mortals, looking after often much smaller charity investment pots? Not much, you might think – but you would be wrong. These were my key takeaways from his words of investment wisdom.

Watch out for the risks No foundations have the right to exist forever, and many will not be fortunate enough to receive any more donations – the Wellcome Trust was founded on a single donation. Life-threatening factors for charity investment portfolios include inflation, concentration and liquidity. We need to avoid falling foul of these risks in order to have the opportunity to grow.

Diversify, but not too much Our investments should not be over-concentrated in one or two or 10 assets, but nor should they be over-diversified into hundreds; otherwise we end up back at the average.

Don't get caught out with your cash flow Cash flow risk is a significant threat – if we have only one spreadsheet, it should be the one analysing the cash in and the cash out of our organisation.

Benefit from charity longevity We should seek to take advantage of our fortunate position as long-term investors, which is something that makes us free to hold assets for a very long time in order to get improved returns.

Use all of the charity's assets Think about the charity's assets in the broadest sense, including our trustees and other stakeholders. Be creative about our investment portfolios and how stakeholders might be able to help gain access to investment opportunities or offer advice to improve returns.

Be responsible and engaged We can use our shareholdings and our charity's reputation to engage with the companies in which we invest, to encourage long-term improvement in corporate governance.

Practise what we preach Our own governance structures should be robust and effective. Our charity committees should be made up of individuals with complementary skills, and external members should be welcomed to fill any gaps. We need to work hard to engage our committees so that they feel involved in the day-to-day charity activities, not just informed by papers published every six months.

So there you go. Easy, isn't it? A checklist to ensure that all of our charities reach the giddy heights of the Wellcome Trust. Well, perhaps not. But it's a sensible list of aspirations that we can probably all relate to in some way. Inspiring thoughts such as these to allow us to continue to challenge and to grow.

Kate Rogers is client director at Cazenove Charities

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