Peace of mind: ongoing discretionary investment management for charities

Charities across the UK and beyond are navigating a turbulent financial landscape. With economic pressures mounting and public services stretched thin, non-profit organisations are being asked to do more with less. From declining donations to rising operational costs, the sector is facing a perfect storm of challenges that threaten its sustainability. The need for a robust and adaptable investment strategy has never been greater. 

Ongoing discretionary investment management offers a compelling solution, providing professional oversight, ethical alignment and the flexibility to support both day-to-day operations and the long-term goals of charities.

Donations and income: a shrinking pool 

One of the most pressing issues is the cost-of-living crisis, which continues to impact household budgets. Charitable giving is often one of the first expenses to be cut. This has led to a drop in one-off donations and reduced regular giving. According to the Charities Aid Foundation UK Giving Report 2025, the main reason provided for not donating to charity was affordability. Meanwhile, government funding is becoming increasingly scarce. 

Adding to the complexity, donor expectations are evolving. Supporters now demand greater transparency, impact reporting, and digital engagement. Charities that fail to meet these expectations risk losing their donor base.

Expenditure: rising costs and growing demands 

Charities are contending with rising operational costs. Inflation affects everything from rent and utilities to staff salaries and supplies, making it more expensive to deliver their services. Staffing pressures are another concern. Recruiting and retaining skilled professionals is increasingly difficult, as charities compete with the private sector for talent. 

To remain relevant and effective, many charities are investing in digital upgrades, from online fundraising platforms to customer relationship management (CRM) systems and cybersecurity. While essential, these upgrades come with significant costs that smaller organisations may struggle to absorb.

Perhaps most critically, charities are facing increased demand for services. As public services are stretched, non-profits are stepping in to fill the gaps, particularly in areas like food poverty, mental health, and housing.

A sector under pressure 

Charities are being squeezed from both ends: income is falling or stagnating, expenditure is rising, and demand for services is increasing. Discretionary investment management may not solve the wider income and expenditure issues for charities. However, it does help to reduce volatility and stabilise income streams, giving them peace of mind that they can continue to meet their short- and long-term goals. 

Understanding discretionary investment management 

Discretionary investment management refers to a service where professional investment managers make investment decisions on behalf of the charity, within guidelines agreed by the trustees and in line with their Charity Investment Policy. The investment manager creates a portfolio tailored to the charity’s objectives, risk appetite and ethical criteria. They reassess the portfolio on a regular basis, making sure that it remains suitable for the charity, whilst taking into consideration market movements and trends. 

Unlike advisory services, where trustees must approve each transaction, discretionary management allows for timely, informed decisions which can be crucial in volatile markets and for charities who may have limited internal financial expertise. 

Alignment with Charity Commission guidance 

The Charity Commission’s guidance (CC14) outlines trustees’ responsibilities when investing in charity funds. Trustees must act in the best interests of the charity, make informed decisions, and ensure investments support the charity’s purposes. Discretionary investment management supports these duties by: 

• Ensuring decisions are made by qualified professionals.
• Providing regular reporting and transparency.
• Aligning investment strategies with the charity’s mission, financial needs and governing documents.

Benefits of ongoing discretionary management 

1. Bespoke portfolio construction 

Investment managers work closely with trustees to understand the charity’s goals, whether it’s income generation, capital preservation, growth, or a balance of all three. Portfolios are constructed to reflect: 

• Liquidity needs for ongoing expenses.
• Time horizons for future projects.
• Risk tolerance and ethical constraints. 

Investment managers can take into consideration a charity’s ethical requirements. Ethical investing is becoming increasingly central to how charities manage their funds; it involves selecting investments that meet environmental, social, and governance (ESG) criteria, while avoiding sectors or companies that conflict with the charity’s purpose. Ethical investing is no longer a niche concern; it can be a central pillar to demonstrating a charity’s values and for public accountability.

This bespoke approach ensures that investments are not only suitable, but also strategically aligned with the charity’s evolving needs.

2. Cash flow management

As discussed, charities often face irregular income streams and unpredictable expenses. Discretionary investment managers can help smooth cash flow by generating income through dividends and interest whilst also planning for larger capital expenditures. That said, any income from investments is variable and not guaranteed. 

This proactive approach helps charities avoid shortfalls and plan for their future. 

3. Governance and reporting 

Trustees have the responsibility of making informed investment decisions on behalf of the charity. However outsourcing this to professional investment managers provides expert oversight, reduces administrative burden and ensures that investment strategies are executed efficiently, in alignment with the charity’s objectives. Charles Stanley provides detailed investment reports and conducts regular meetings and reviews with the trustees. This supports good governance and ensures trustees can demonstrate compliance with their internal policy documents.

4. Risk management and diversification 

Discretionary investment managers apply rigorous risk management techniques, including:

• Diversification across asset classes and geographies.
• Monitoring economic and market risks, adjusting portfolios in response to changing conditions.
• Responding quickly to market changes.
• Adjusting strategies in line with new funding or policy developments. 

These measures help protect the charity’s assets and ensure resilience in uncertain times.

Supporting the charity’s mission

Ultimately, the goal of investment management is to support the charity’s mission. Whether funding community programmes, maintaining facilities, or providing services, a well-managed investment portfolio provides the financial foundation for real impact. 

Discretionary management allows trustees to focus on governance and strategy, while professionals handle the complexities of the market. It’s a partnership that enhances financial stewardship and empowers charities to do more. 

Conclusion: a strategic investment in stability and impact 

For UK charities navigating financial uncertainty, regulatory obligations, and ethical expectations, ongoing discretionary investment management offers a strategic advantage. 

By partnering with a trusted discretionary manager, charities can ensure their investments are mission-driven, supporting their purpose today and helping to secure their legacy for tomorrow.