Charities should prepare for a recession in the next five years and expect lower than usual returns on investment, an audience of charity finance experts was told yesterday.
Donough Kilmurray, managing director of the Goldman Sachs Investment Strategy Group, urged voluntary organisations to rethink their investment strategies, when speaking at a forum for charity investors in London yesterday.
Kilmurray said charities that rely on returns on investment as a form of income will not be able to spend as much in the coming years.
He warned “returns are likely to be well below historical averages for the next few years” and urged organisations to “focus on their mission and reconsider how they use their capital”.
Kilmurray said: “We are assuming a recession in the next five years. If you are a very cautious charity that has needs for your capital, it is very important you keep it maintained for the next few years.
“Instead of spending on high yields to lose a lot of capital, spend a little bit of capital on safer assets and the whole experience will be much smoother.”
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He added: “A lot of charities in the UK keep their capital where it is and spend their income, which is perfectly reasonable. Unfortunately these days you can’t do that and save assets.”
One way he suggested for charities to maintain a social impact with lower spending could be to move their investments to organisations with a social cause, such as medical research.
Kilmurray also warned charities not to sell all their assets when the markets are low. “Some people destroy the capital they have worked so hard to create by selling it,” he said.
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