In a recent analysis, it was revealed that UK charities are sitting on approximately £31 billion in cash assets. This significant sum, which represents 13% of the total £250 billion in assets owned by charities with an annual income of over £0.5 million, is not currently being invested to its full potential.
The Cost of Caution
Charities traditionally favor the safety and liquidity of cash holdings, but this conservative approach may be costing them. With more than half of the largest UK charities lacking long-term investments, the sector could be missing out on substantial returns. The consultancy firm Broadstone suggests that if the £31 billion were invested in a typical Money Market Fund, it could yield as much as £1.5 billion in returns, assuming a 5% return over a year.
The current economic landscape, marked by inflation and geopolitical uncertainties, has eroded the real value of cash assets. This erosion hampers the progress of charities, affecting their ability to fund their missions effectively.
A Shift Towards Strategic Investments
The Charity Commission’s CC14 guidance encourages trustees to make investment decisions that further their charity’s purpose. This includes ‘social investing,’ which aims for both a financial return and the advancement of the charity’s objectives through the investment itself.
Investment doesn’t have to be daunting or high-risk. There are secure investment vehicles available that align with a charity’s mission and can provide a good return. By moving away from a reliance on cash assets, charities can take a more active role in growing their funds and, by extension, their impact.
The Future of Charitable Assets
As charities begin to recognize the potential benefits of investing, we may see a shift in how these organizations manage their assets. With proper guidance and a focus on mission-aligned investments, the charity sector can look forward to a future where financial growth and societal impact go hand in hand.
