The investment portfolios of more than one in 10 charities lost value this year, a survey shows.
Research by Newton Investment Management, one of the sector’s biggest fund managers, found that 12 per cent of charities reported negative investment returns in the year to March 2022.
This is a six-fold increase on the two per cent of charities whose investments lost value in 2020/21.
One in four charities saw the value of their investments grow by up to two per cent this year, while one in seven saw it increase by between three per cent and six per cent.
Newton’s report says: “When looking at overall investment returns over the last 12 months, it is clear that some of the initial signs of recovery seen in 2021 have been overturned by the events of the year.”
The research identifies “the challenges of inflation, a cost-of-living crisis and the legacy of the pandemic” as factors having an impact on both the demand for charities’ services and efforts to generate income.
The report is based on a survey of 91 charities with combined assets worth £7.3bn.
Charity investments are also a source of income and Newton found a sharp increase in the proportion of organisations reporting that their investment income “is sufficient to meet the obligations and commitments of your charity”, from 33 per cent in 2020/21 to 94 per cent in 2021/22.
Nearly all the charities surveyed – 99 per cent – said they were at least “somewhat concerned” about the impact of inflation, which the report said was “now the main concern for charities and by a significant margin”.
Following the shocks caused by Covid-19, 68 per cent of charities said they were “re-evaluating their reserves policy”, up from 40 per cent last year, while 60 per cent were “reviewing the amount of risk we can tolerate”, up from 27 per cent.
Meanwhile, nearly half the charities surveyed by Newton – 49 per cent – said it was “very important” to make socially responsible investment decisions when managing their portfolios. This is the highest proportion Newton has recorded and up from 41 per cent a year ago.
The report described this as a sign of “steady, albeit muted, progress around sustainable investment”.
Rorie Evans, the head of charity clients at Newton, said: “While the worst experiences of the Covid-19 pandemic may now be behind most charities, the pandemic’s longer-term impacts, coupled with new widespread concern around inflation, the cost-of-living crisis and geopolitical uncertainty, loom large for the sector.”