We would advise that charities with under £1m to invest consider investing some or all of their money in funds.
Common Investment Funds (CIFs) are pooled investment funds set up specifically for charities. CIFs are constituted as charities in their own right. They offer investment opportunities in equities, cash, bonds, property and hedge fund asset classes. A selection of CIFs incorporate Responsible Investment criteria and your charity may wish to investigate how CIFs employ positive screens, negative screens and/or engagement approaches before investing.
As CIFs are pooled investment vehicles, the opportunities for a single charity investor to influence the Responsible Investment approach of a CIF may be limited. It is therefore important for trustees to seek information from the CIF manager about the Responsible Investment policies employed by the fund and to select a fund that fits with the responsible investment objectives of your charity. Our Pooled Funds Guide is a helpful resource to guide you through the ethical criteria of charity pooled funds on offer.
A CIF’s engagement policy, if it has one, is normally the same as the engagement policy of the fund manager across all the funds they manage. Seeking information on the engagement approach of a fund manager may help your trustees to ascertain which CIF’s engagement approach best fits with your charity’s mission and reflects its issues of concern.
A unit trust is an investment fund shared by lots of different investors. It is an ‘open-ended fund’ which means the fund gets bigger as more people invest and gets smaller as people withdraw their money. The fund is divided into segments called ‘units’. Investors take a stake in the fund by buying these units.
An OEIC is a company whose business is managing a fund. The company’s shares are listed on the London Stock Exchange, and the price of the shares are largely based on the underlying assets of the fund.
OEICs are open-ended, which means that they can adjust the amount of shares in the fund by either issuing or eliminating shares. If an investor wishes to sell their shares they can sell them back to the fund, rather than to other investors.
An investment trust is a company listed on the London Stock Exchange whose business is to invest in other companies. They are ‘close-ended funds’ because there are a set number of shares and this number does not change regardless of the number of investors. The share price will fluctuate according to supply and demand for the shares.
A small number of ethical funds are ‘funds of funds’. The manager of this type of fund does not put investors’ money directly into the stock market, instead they invest it in other managers’ funds. They offer similar conditions to the other three pooled funds and are generally suitable for lump sum investments. To ensure the ‘fund of funds’ is following the ethical criteria you require you would need to check the underlying policy of each of the funds ‘contained’ in that fund.