Investments

WHEN COMMITTEES COME INTO THEIR OWN

When it comes to effective investment decision-making for charities, committees can help trustees navigate the governance humps they face.

DELEGATE TO ACCUMULATE

Trustees can make investment decisions themselves, but in practice many choose to delegate investment decisions to experts, such as external managers and/or advisers, for maximum impact. In the much larger charities, they may even delegate investment decisions to internal professionals.

Whichever route they choose, trustees must demonstrate that they still have overall control of decision-making and have complied with their duties, in line with best practice as set out in the Good Governance Code: "Delegation to committees, staff and volunteers (as applicable) works effectively and the use of delegated authority is properly supervised."

THE CASE FOR A SEPARATE COMMITTEE

Charities that have invested, or want to invest, significant funds will benefit from having a trustee with specialist knowledge of investments on its board or committee with responsibility for investment. Some charities establish internal investment committees to advise the trustee board on the more detailed aspects of its investment policy, for example, asset allocation.

Having a separate committee gives charities the option of having committee members with investment acumen who aren't necessarily part of the main board, thereby adding a level of both expertise and independence. This might be particularly useful for charities whose constitution allows them to only have members on their main board, which can restrict the pool of investment expertise they can tap into.

QUARTERLY COMMITTEE MEETINGS MAKE SENSE

It's also important for committees to think carefully about how many times a year they meet. While there is no one ideal number, for more complex portfolios, quarterly meetings are typically seen as the minimum frequency to ensure that investments are closely monitored at all times. However, demands on committee members' time need to be taken into account, particularly if they're also full trustees and/or sit on other committees.

SOURCING THE RIGHT EXPERTISE

Finding people with the right investment expertise is a perennial problem, especially for smaller-scale charities. Some question whether paying good candidates for their time would increase both effectiveness and access to expertise is an ongoing debate with consensus generally that it would not. Either way, identifying credible candidates as volunteers to help charities takes time and hard work.

CHALLENGE THE STATUS QUO

Doing something because it is what has always been done is not good enough. Having the right approach in place, whether through an investment committee or not, is crucial to enabling trustees to fulfil both their duty of care - and their duty to maximise return on their investments.

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CAF Financial Solutions Limited (CFSL) is authorised and regulated by the Financial Conduct Authority FRN 189450. Registered office is 25 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4TA. CFSL is a subsidiary of Charities Aid Foundation (registered charity number 268369).

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