Charities return to long-term investments


14 Dec 2023

Unpredictable markets are driving charities back to longer-term horizons, but there are challenges ahead, finds Andrew Holt.


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Unpredictable markets are driving charities back to longer-term horizons, but there are challenges ahead, finds Andrew Holt.


When it comes to investment the main concerns of charities are shifting in a more positive way, while the sector adjusts to the new realities of a challenging economic backdrop, according to a study.

In its annual charity investment survey, Newton Investment Management revealed that charities show a decline in the concerns following the pandemic-era challenges and burgeoning pressures from an inflation as well as the cost-of-living crisis, highlighting how they are adapting to the often cited ‘new normal’.

The survey signifies a big positive: a return towards longer-term planning and long-term investment strategies within the sector.

Although most charities (89%) are experiencing some pressure or negative impact from the cost-of-living crisis, with 59% of reporting higher demand of its services compared to 2022.

However, there is hope for the future, as more than half of charities do not believe the cost-of-living crisis will have a lasting impact on their investment policy.

Similar to 2022’s survey, inflation and rising salaries remain pressing concerns: two thirds of charities identify inflation (66%) and almost half select rising salaries (49%) – reflecting continued inflationary pressure on the costs of staff and materials, and reduced income from investments and fundraising.

However, a decline in charities’ level of concern on most major issues compared to last year may demonstrate that, while these economic pressures still remain, the sector is learning to operate within this ‘new normal’.

Although the survey reveals new risks and challenges. Since the pandemic, charities are more reliant on online services, with moves to digital fundraising and operating exposing them to the risk of cybercrime.

Nearly half (44%) of charities now consider cybersecurity to be ‘very concerning’, up from 9% in 2022 – significantly outscoring the direct effects of the cost-of-living crisis.

This spike in concern further reflects a shift away from short-termism in reaction to shocks, and a reversion back towards longer-term planning within the sector.

Asset allocation change

The survey also reveals a significant amount of asset allocation change from 2022, with British charities increasing their exposure to overseas equities, overseas bonds and a notable rise in the use of UK bonds. 

While at the same time there has been a decline in allocation to UK equities, property, hedge funds and private equity. Global rises in interest rates are likely to have incentivised charities to reposition assets.

“The backdrop for investors has now shifted, with an unprecedented market regime change underway following four decades of asymmetric monetary policy, lower inflation and increasing globalisation”, said Sarah Dickson, head of charities business development at Newton Investment Management. 

“In the midst of a cost-of-living crisis, with the added challenges of inflation and rising salaries, the adaptability and resilience of the sector is evident as charities are adapting to this new normal while also still seeking to address longer-term concerns,” Dickson added.


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