Opinion

Riding the bull

Finance | Daniel Phelan | 28 Oct 2009

One good thing about a near-death experience is that it is usually followed by a sense of euphoria arising from the knowledge that you have survived and that your worst fears did not come to pass.

This slightly giddy joy is putting a youthful, carefree smile on the face of many in the City at the moment, hugely relieved as they are that the terrifying apparition of economic devastation staring us in the face in March has turned out to be just a particularly frightening Halloween mask after all.

Since then, investors have feasted on a soaring stock market displaying the steepest bounce in living memory, gorged on the recovery of corporate credit instruments once priced for an Armageddon that has not transpired and floated out of the mire on a helium balloon of quantitative easing.

It would be nice to think that that was that. Normal service will now be resumed. Once again we can go back to believing that the City knows best and we just need  to choose one or another set of suits with nice smiles who will look after the piggy  bank for us and give us our pocket money every Saturday.

This might not be all that safe an assumption. The ability of managers to  steer the roller coaster on the way down appeared to be precisely zero, so what makes us think they will have any more control on the way up?

With many charities stuck behind the curve sitting on large pools of cash earning next to nothing while everything else flies away, is it already too late to join the party? And should decisions be made on such short-term considerations anyway?

It’s now time to have a long hard look at your investments and decide exactly what it is you expect them to do for you. After that, put some of the managers listed in our charity fund management survey this month through their paces and see if they can put a smile back on your face too!

More risks for bigger rewards

The largest 350 charities in the UK have grown on average by more than 8 per cent each year for the last 14 consecutive years, a performance that brings to mind nothing less than a booming emerging market.

But the problems charities address are on such a vast scale that even this rapid growth has not resulted in organisations of sufficient size to be able to do much more than scratch the surface of the issues they face.

Yes, of course there has been progress. Yes, sufferers have been relieved. But millions of people still suffer and die from preventable diseases, hunger and poverty are endemic, social injustices riddle our communities, and so on.

Speaking at Charity Finance Live recently, US fundraising supremo, Dan Pallotta, proposed that charities should grasp the full range of commercial tools to grow in the same way as successful global companies like Coca-Cola or Nike (Existing charity model 'will never solve the world'€™s problems€' says Pallotta).

By this he means: pay whatever salaries are necessary to acquire absolutely the best people; invest hugely in marketing and advertising; provide investment opportunities for risk-capital to make a return; encourage entrepreneurs to devote their energies to social causes even if it means rewarding them handsomely for doing so; and, be prepared to have longer planning horizons rather than spending everything at once to relieve immediate needs.

Speaking as part of the same panel, Andrew Hind, chief executive of the Charity Commission, observed there was nothing stopping charities doing any of these things except “the court of public opinion”.

Charities don’t take risks because every move is closely scrutinised by an uninformed press and public. It’s now time to embrace a more entrepreneurial approach, educate the public and stop making these excuses for ourselves.

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