Specialist Outlook

Charity Focus: “Are you being served?” What should you expect of your fund management relationship?

17 October 2013

Richard Maitland, Sarasin's Head of Charities, examines fund management.

The twelve months ending this 30th September will have seen long-term charity portfolios produce total returns of about 16%. It has been a good period for investors. While bonds have produced desultory returns, equities and other real asset classes have enjoyed the steady recovery of the world’s major economies and the increasingly forthright statements emanating from leading central bankers.

But a leading investment management offering is not just about producing strong returns. A good fund manager will wrap up their practical management of client portfolios with a service that allows their customers to have confidence through good times and bad. In this article, we consider what attributes charity trustees and executives might look for in their fund manager.

‘Customer service’ conjures up all number of images from that well-trodden comedy to recorded messages and faraway call centres. There is no doubt that ‘service’ is everything and should feature high on an investment manager’s list in its offering to clients. Yet, whilst most claim to deliver exceptional levels of personal attention, provided by well-rounded individuals, and bespoke investment strategies, accounting for the most esoteric of nuances, our experience suggests that this is not always the case.

We are fortunate to manage the investments of over 280 charities and are invited to take part in ‘beauty parades’ throughout the year. Together with the trustee training we offer, (Sarasin & Partners has trained over 3,000 trustees and charity executives in the past 8 years), and the fact that many of our charity team are trustees in their own right, we are reminded regularly as to what the word ‘service’ should really encompass.

So, what forms the basis of a good overall service?

Transparency – this applies to many aspects of investment management: no-one wants to be embarrassed or surprised by the results or holdings in their portfolio. For example, if you have imposed certain restrictions or an ethical policy, to what degree does your portfolio comply with your instructions? If you are using pooled funds, what is your ‘indirect’ exposure to outlawed areas? Following the Church of England’s Wonga debacle, this is a subject at the top of many agendas. And do you know what you are paying? Fees and charges should be a black and white issue but again, experience tells us that about 70% of investors are not aware of their total costs and struggle to dissect some opaque charging structures and practices across the investment management industry. Are your quarterly reports clear enough: do you know what you own? Which decisions taken by your manager have added or subtracted value?

Empathy – a good fund manager will have a thorough understanding of your objectives and importantly, how you would like to achieve them. This should be evident in the way matters are explained and the lengths to which they go to meet your reporting requirements, ethical or income needs. Placing trust in your manager lies at the heart of a strong relationship. When combined with empathy, it may well result in some ‘home truths’, along the lines of ‘well, you could do that, but the investment consequences are as follows…’ Empathy should not always mean saying ‘yes’. It is a tough test, but if your manager tells you something you don’t want to hear, or admits to being unable to provide something (however much it pains him to do so) – do you have confidence that theirs is the right, if perhaps an unhelpful, answer?

Proactivity – most charities cannot afford to employ investment consultants on a permanent basis. So a significant part of an investment manager’s role is to ensure that a charity portfolio adapts to reflect current and expected activities or any development in investment markets. Revising ones strategy should not be done as a one-off exercise ahead of a retendering review or as a 10 year ‘revolution’. We consider it a continual process that evolves as circumstances demand. It may be that there is no change necessary but it is important that the appropriateness of your portfolio is monitored and tested regularly. Has your investment strategy, benchmark, income expectation or risk profile altered in any way over the last five years and to what extent has your investment manager been proactive in prompting an alternative approach or discussion?

Experience – your questions are more likely to be answered correctly if you appoint experienced individuals with a comprehensive knowledge of the various asset classes and the way in which they can be brought together to help a charity achieve its aims. Additionally, a thorough understanding of charity law, the ways in which trustee boards operate and the key challenges facing executives today will all form part of a well-rounded charity specialist. The Third Sector is an extraordinarily diverse part of the British economy: somewhere, a charity has probably faced precisely the issue you are tackling. Elsewhere, a multitude of investors have had to solve complex investment conundrums. It is rare that a charity investment issue requires a reinvention of the wheel. An experienced investment manager should be able to help you solve your problems, perhaps introducing you to others who have travelled the same path before you.


A strong relationship and high level of service will have been built through the initial and on-going strategic advice, with appropriate investment training offered when necessary. Your portfolios will have been implemented with minimal administrative burden, with ad-hoc tasks and regular, clear reporting carried out in a timely and accurate manner by experienced, eloquent and dedicated managers.

Of course, performance (declared net of clearly understood charges) must be good both absolutely and relative to an appropriate benchmark or peer group.
Ultimately, you will have slept well at night, comfortable in the knowledge that your investments are in safe hands. This is what we aim to do for clients of Sarasin & Partners.

This article first appeared in Sarasin & Partners House Report Quarter 4 2013.

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Richard Maitland

Richard Maitland is a partner and Head of Charities at Sarasin and Partners.

Richard has more than 22 years of investment experience and joined Sarasin & Partners in 1992. In addition to UK equity research, Richard has led the firm’s third party funds research team, analysing specialist equity funds and alternative assets while managing portfolios for a range of charities, pension funds and unit trusts. He now focuses on managing diversified multi-asset portfolios for charities and assists in setting the firm's long-term strategic asset allocation. He is author of the Sarasin & Partners Compendium of Investment. Richard has a degree from Newcastle University and is a member of the St Paul’s Cathedral Investments Committee.  He has been a visiting lecturer on investment and endowment management at the Judge Business School and the Universities of Stellenbosch and Vienna.

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