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HOW DO WE SET OUR INVESTMENT OBJECTIVES?
Charity trustees should be clear about exactly what their charity is trying to achieve by investing its funds. These objectives will be different for each charity depending on its aims, its operating model, its timescale for achieving a return and the resources available to it for investment.
The objectives may be to preserve capital, generate income or a mixture of both.
The objectives will be in uenced in part by a consideration of the balance between meeting the needs of the charity’s bene ciaries today with the need to meet future needs. This will be a key consideration for religious institute charities most of which have a speci c commitment to look after the members of the institute for the rest of their lives. This commitment, which is often dif cult to quantify accurately for obvious reasons, differentiates religious institute charities from “mainstream” charities where such commitments do not exist in the same way. It also means that investment objectives may change in a subtle manner as the age pro le of members increases with the need to grow capital giving way to a need to generate income and retain capital value – in a similar way to a pension fund.
Other in uences on objectives will be the level of income generated from sources other than investments, future spending commitments, the level
of restricted funds that have to be used for a speci c purpose such as being transferred to another missionary country in due course and the probability of unplanned events that might impact on the charity.
In formulating investment objectives, the trustees need to be able to identify funds that need to be immediately available, funds that can be invested but only for a relatively short period of time, monies that may be invested for the longer term, and monies that are available if needed in an emergency or “on a rainy day”.
WHAT RISKS SHOULD CHARITY TRUSTEES CONSIDER WHEN INVESTING FUNDS?
Risk is part of the investment process and there are a number of risks that trustees should take into account. Importantly, trustees need to consider the
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