Small sub-committees make better charity investment decisions, say experts

Charities can become 'more fleet of foot' by reducing the number of people involved in decision-making. David Ainsworth reports

Charity finance committee
Charity finance committee

The turmoil in the investment markets has caused many charities to look again at their investment practices. Some organisations have reviewed their choice of fund managers, their advisers, their investment goals and the way they benchmark their performance.

But one easy way for charities to improve the performance of their portfolios, according to the investment industry, is to look at how trustees make investment decisions. Small subcommittees, meeting more frequently, are more effective, according to several experts.

Vinay Bedi, director of charity services at investment consultancy Brewin Dolphin, told Third Sector there was a shortage of charity trustees with suitable experience, which meant boards could not respond quickly to changing market conditions.

"Many trustees don't understand what they should be doing with a charity's funds," he said. "Fund managers will do what charities want, but charities often don't know what they really want to achieve."

Bedi said charities should establish specialist investment committees and allow a small number of suitably qualified trustees to make investment decisions with their finance directors, then report back to their full trustee boards.

Tom Rutherford, a vice-president at JP Morgan investment managers, said charities that had smaller committees had been able to respond well to market circumstances in the past year.

"Charities that use a small panel of investment specialists are much more fleet of foot," he said. "A lot of charities that haven't used the structure before are heading in that direction. It clearly works well and is easy to use."

Peter Knapton, director of charities at M&G Investments, said a small investment committee offered a number of advantages. "Decisions can be made more easily in a smaller group," he said. "Interaction is easier in a group of that size."

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