How to get the most out of your relationship with your Investment Manager

An Investment Manager’s role is about helping your charity to achieve their financial objectives: to protect and grow a charity’s assets over the longer term.

| 5 min read

An Investment Manager’s role is about helping your charity to achieve their financial objectives: to protect and grow a charity’s assets over the longer term. Furthermore, as both a Trustee of a charity with its own investments and as an investment manager, I am increasingly finding people and charities want their investments to do more than make money.

What should you expect from your Investment Manager? In my experience, I would highlight the following:

1. Expertise – a demonstrable competence, a track record of performance and the ability to provide innovative solutions.

2. Empathy – by understanding what matters to a charity and why, for example, ensuring any investment decisions adhere to ethical views.

3. Accountability – who is making the investment decisions and what is the underlying investment philosophy? Charles Stanley has a rigorous research function but does not employ a relationship manager model, so as an Investment Manager we meet with clients as well as investing on their behalf thus reinforcing our accountability.

How you invest today is part of your own charity’s story. What you want the world to be in 10 years is affected by what you invest in and how you might meet your goals in the future?

For example, many charities invested in oil and gas companies for dividends. Today, utilities companies and renewable energy businesses could provide this as part of a balanced portfolio. Ultimately, your investment portfolio has the power to shape the world you want to live in and can be the change that you want to see.

We are often asked about how to consider implementing such change, to which we’d refer to a five-step process with your investment manager and trustee board:-

1 Discuss your requirements; 2 Define your objective; 3 Design a strategy; 4 Implement the strategy; 5 Monitor and review.

Firstly, look at why you want to invest and the objective, such as, ensuring long term sustainability of an endowed fund, or generating a total return or income to make grants to beneficiaries.

A skills audit can help and may already form part of your charity’s governance. Many trustees serve on more than one board and may have had similar experiences, so it’s a good way to identify this which may help when discussing your investment requirements.

Decide how you will monitor an investment strategy. For example, for larger boards, it can be beneficial to set up an investment sub-committee. In any case, set dates for review and make this clear at the outset of your investment relationship, as well as agreeing on benchmarks for performance comparisons.

Secondly, define your investment objective. For example, this could be growth, income or a balance of both. The latter can be particularly relevant for Total Return strategies. If an income focus, how might an environment of declining dividend yields and lower interest rates affect your ability to meet your objectives?

As always with investments for charities, consider starting or updating your charity’s Statement of Investment Policy. This can be a relatively short document outlining “what good looks like” but can be an invaluable document for trustees and investment managers alike.

Thirdly, design a strategy. You may wish to consider the evolving market for ESG integration. ESG stands for Environmental, Governance and Social factors. Not only are some ESG strategies providing better investment returns, but it is increasingly a source of risk mitigation. Furthermore, this can also make for better alignment with your charity’s values and social purpose.

Fourthly, it is about implementation. Have a clear roadmap of what you’d like to achieve and over what timeline by writing your strategy down and evaluating against it. This doesn’t need to be complex but assesses your investment manager’s ability to meet your objectives.

If you are investing from cash reserves, then consider planning this in advance, for example, through a phased investment approach that smooths out the potential for shorter term stock market volatility.

The final but continual step is to monitor and review. Reporting could be through regular meetings or a written summary report for the Trustees. This can be especially useful to ensure accurate minute taking. It may also include an annual presentation to a wider board. It is also important to consider accessibility as investments should be understandable and relevant to your charity’s objectives. It can help to ensure updates are tailored to those less familiar with financial markets by avoiding the overload of technical information and investment jargon that may intimidate, as each Trustee has their own specific skill set.

Undertake a thorough and regular tender process to ensure service and returns are strong and remain so. You may also wish to consider appointing an investment professional as a trustee; from my experience, most will welcome the opportunity to share their expertise.

At Charles Stanley, charities as well as their Trustees, are a significant and valued part of our client base. Indeed, we began as a family business over 200 years ago and that ‘family’ ethos remains in our DNA today. We believe in face-to-face relationships and on-going advice, which we will continue to offer both in person and virtually during and post crisis.

Keep in mind this five-step process when looking to get the best of your investment relationship, whether that be an existing or a new one, and importantly ensure who you are dealing with has expertise, empathy and accountability.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

How to get the most out of your relationship with your Investment Manager

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