Time for trustees to review investments?

The Charities and Trustee Investment (Scotland) Act 2005 outlines four general duties for charity trustees regarding  investments. One of them is to “act with the care and diligence that is reasonable to expect of a person who is managing the affairs of another person”. This includes “acting as a guardian of the charity’s assets”. Also essential for all trustees are maintaining the value of any investments the charity is and ensuring a suitable return is generated.

The Scottish Charity Regulator also mentions the use of reasonable business sense when dealing with the charity’s   affairs, and taking professional advice where appropriate.

What about charitable trusts?
In the case of charitable trusts, the 2005 Act gives trustees wider powers regarding investments. This applies if existing trust powers are restricted, or not set out in the trust deed. This brings responsibilities about considering suitable investments and securing “proper advice”.

Getting some investment help
Where trustees do not have the skills to manage an investment portfolio, there is often the need to appoint a third party such as an investment manager. Trustees must be aware that arrangements made with an investment manager must be kept under review, as set by the Act.

Considerations during regular reviews
When reviewing investment manager arrangements, trustees have two primary concerns – performance and cost. They are often worried that they have insufficient  information to measure and evaluate both factors.

When completing a review, trustees should also consider:

Asset allocation Charitable experience
Benchmarking Management style
Locality and personnel Research capabilities
Reporting Risk management

Circumstances and investment objectives vary greatly from one charity to another. Services provided by an investment manager often must be tailored.

Chiene + Tait Financial Planning regularly deals with all aspects of charitable investments and has introduced a new investment review service specifically designed to assist trustees reviewing their investment obligations.