According to the latest figures from WM Performance Services, charities in this country have 55 per cent of their assets invested in UK equities and 23 per cent in overseas equities.
"Charities are coming under growing pressure to spend more, and many rely heavily on their investment portfolios to do this," said James Codrington, head of charities at Baring.
"They could be forgiven for depending on equities to generate significant returns to help fund their work, because equities have outperformed bonds and cash in the long term. Although equity returns can be huge, the losses can be big as well."
Charles Nall, finance director at the Children's Society, warned that overseas equities can present the greatest risks.
"Charities have a duty to diversify their portfolios, so some exposure to overseas equities is appropriate," he said. "The thing to watch for is unintended exposure to overseas markets. The biggest UK companies make the majority of their earnings from their overseas businesses. Combined with direct holdings in foreign companies, a charity's portfolio might be exposed to the risks of foreign economies.
"However, if all a charity's UK equities are in small UK companies, then all earnings will be in pounds sterling. What matters is how the investments structure is linked to the spending commitments you have."