News

Regulator reviews guidance on investments

Finance | Tania Mason | 7 Sep 2009

The Charity Commission has started consulting the sector on a revision of CC14, its guidance on investments.

CC14 was last updated in 2003 and is widely considered to be out of date and not fit for purpose in the current financial climate – especialy the sections on hedge funds and socially responsible investment (SRI).

The Charity Commission has begun holding focus groups with interested parties to gauge their views on how the guidance should change.

A Commission spokeswoman said: "Trustee boards are taking a greater interest in investments in the light of the economic downturn, and we are updating our guidance to ensure it is fully comprehensive and up-to-date with recent developments in the investment market.  

"We held a really helpful focus group in June this year with key representatives from charities and the investment industry to discuss the issue, and we will be sharing the draft guidance with these critical friends in the coming weeks."

Keith Hickey (pictured), chief executive of CFDG, is lobbying the Commission to make the section on SRI clearer so that charities feel better able to eschew or select certain stocks on ethical grounds.

“Many charities incorrectly believe that they cannot invest in ethical funds as that may mean that they do not maximise investment returns," he said.  "But the Bishop of Oxford case means that there are circumstances that they can. 

“For some charities investment in certain types of shares may maximise their investment returns but adversely affect their overall income; for example, a cancer charity investing in the tobacco sector.  It is important that trustees look at the bigger picture when making their investment decisions and ensure that their investment policies support the charity's overall strategy.
 
“The review currently being undertaken by the Charity Commission is very timely and I think that it is important that when they look at investment they put it into the context of the triple bottom line that charities are working to, not just the bottom line.”

Hedge funds guidance 'out of date'

Andrew Pitt, head of charities at UBS Wealth Management, also said that vairous aspects of the hedge funds section also needed updating.  He acknowledged, however, that considering the current guidance was nearly seven years old, it had stood the test of time well.

Pitt felt that the overall tone on hedge funds was not exactly encouraging for trustees that were looking for guidance on the hedge fund arena, as it seemed that the pitfalls were generally highlighted to the detriment of the "very considerable" advantages that such funds can bring to investors. 

Pitt also felt that it would be helpful if the risks to the tax treatment of hedge funds were better clarified, as he felt the existing guidance seemed aimed at putting charity trustees off hedge fund investment.

"It currently emphasises that 'the investment and return may not come within the tax exemptions provided for charities'," he said. "But most hedge fund investments by charities, especially investment into funds of funds, does come within the exemption, so I think the guidance is far too cautious in the way that it is worded."

The Commission hopes to publish a new version of CC14 before the end of the year. 

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