Pandemic hits charity investment income

08 Jun 2020 News

Charity investment income has been impacted by the market turmoil caused by the coronavirus crisis.

The latest data on nine pooled equity funds, published in the June issue of Charity Finance, shows that all achieved negative net returns of between 20% and 30% for the quarter to 31 March 2020.

Experts have warned that charities are likely to see pressure on equity investments for at least the next year and a half.

Comparable figures for portfolios managed for wealthy private individuals, produced by the research firm ARC, show average negative returns of between 7% and 17% for the first quarter, depending on the risk appetite of the investor.


Guy Davies, secretary of the Charity Investors' Group, said: “The two short-term impacts of the Covid-19 crisis on charity investment portfolios are the increase in volatility of assets generally and income. Despite the ongoing crisis, global equities have risen strongly, continuing the recovery from the March lows.

“Despite this, equity income and property yields will be depressed for at least 18 months, reducing income by between 15% and 30% for most charity investors. Adopting a total return strategy, being able to spend income and capital, will enable charities to maintain their spending in the short and long term.

“Having a diverse range of assets will also protect against the extreme volatility of equities, such as UK government bonds and gold being positive throughout the crisis. Investing away from the UK has also benefited as the UK market is still dominated by energy and financial stocks, lacking in technology companies that has performed well during the crisis, together with the general weakness of sterling compared to US dollar, euro and yen.” 

Risk of a second wave

Davies added that charity investments would be vulnerable to any new spike in coronavirus cases in the near future.

He said: “Despite the dreadful health and economic news, markets around the world have bounced back at the fastest rate in history. This is the result of the immense coordinated global fiscal and monetary stimulus provided in late March.

“The future progress of markets will depend on the risk of a second wave of the virus as the developed world comes out of lockdown.”

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