Charitable assets have grown more than charitable spending, says investment firm

11 Jan 2019 News

The UK’s largest investment charities have seen their assets grow by £1.7bn more than their charitable spending over the past five years, according to new research.

Investment firm SEI analysed the accounts of the 212 charities with the largest investment endowments in the UK and found their total spending over the past five years was £3.7bn.

The firm found that spending trailed growth by 44 per cent and suggested that the charities could have increased their spending by £1.7bn to £5.4bn.

It argues that this underspend is due to charities having fixed spending rates over a long period of time and that they should instead look to have a more tailored approach.

However, James Brooke-Turner, director of financial consultancy Yoke and Co, told Civil Society News that charities enjoy having sustainable distribution rates.

He said that while charities who spend using a total return formula would have been able to spend more over the past five years, when the market dips they will have to spend less.

Charitable foundations enjoy having a fixed distribution rate as it enables them to make long-term spending plans.

He said: “Charities that spend on a Total Return formula (still a minority) could have spent more over the last ten years and many have, but at some point will have to spend less as market values fall.

“Most dislike spending volatility more than market volatility so will aim for a sustainable distribution rate.

“Charities that spend investment income will not have seen a significant increase in their income (as opposed to their asset values); I’m not sure how many income spending trustees would tolerate the annual deficits that higher spending rates imply.”

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