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A Guide to Reviewing your Charities Investment Manager

Updated: Feb 9, 2023

Reviewing investment performance and managers on a regular basis is a legal responsibility of trustee boards where charities have investment portfolios. While there are no specific requirements for such reviews, most charities tend to have ongoing monitoring on a quarterly or semi-annual basis. A more comprehensive review is typically held once every three years.

Charities generally tend to use the services of investment consultants less than pension funds and other asset owners, with only one-in-three charities engaging professional help. Others conduct reviews in-house, sometimes with rather limited resources in place. In many cases, reviews take the form of a tender process where the incumbent manager is compared against a set of competitors. Unfortunately, such a process can be as inefficient as it is laborious. Without prior analysis, interviewing a selection of managers with a generic brief can be extremely subjective not allowing for any conclusive comparison. Often the charities investment manager appointed is the one that performs best in a presentation on the day.

We advocate for starting the process with an objective review of the incumbent arrangements, which can in itself complete the due diligence process if it concludes that the manager remains fully suitable. If there is a need to select an additional or a replacement manager, such a review can create a foundation for a much more efficient selection process.

We set out four main steps for a review that charities can perform in-house if they have sufficient resources or with the help of an investment consultant.

Investment strategy

Past performance can be only reviewed against the initial strategic objectives and benchmarks. When the managers are advising on the strategy in addition to managing money, they should be assessed both on the basis of the efficiency of the strategies that they proposed and their execution. When the managers were given a specific brief, understanding whether the brief was correct and if it remains relevant, is also important to make decisions on any future changes to the portfolio. Some managers have capabilities across most asset classes and can easily accommodate a change in strategy if required. Others can be focused on more specific solutions. Strategy review requires strong investment acumen and it should be a priority for charities when allocating resources and considering any professional help.

Investment performance

A performance review can be very simplistic where the actual portfolio returns are compared to a set of agreed benchmarks or peer group indices. The nuances, however, can reveal very interesting information.

Most managers report portfolio returns against a pre-agreed benchmark that has been often devised by a manager themselves. For a balanced charity portfolio, it is very common to have an equity benchmark equally split between UK and Overseas equities. Over the past five years, the former achieved 30% total return, while the latter just over 90%, all in GBP. While the managers might have been reporting strong performance against their own benchmarks, the question to ask is why this benchmark was selected in the first place, which again might bring us back to the review of strategic asset allocation.

For a more comprehensive analysis, we suggest analysing risk-adjusted returns to understand if positive performance came at the expense of higher volatility, potentially exposing the portfolio to a higher level of risk than was agreed. Understanding the drivers of performance and stylistic tilts in the portfolio and putting it in the broader market context, also helps make a more informed decision regarding a manager’s performance. While investment returns are ultimately the most important factor when making a decision on manager retention, lacklustre performance does not necessarily warrant an immediate replacement. We have many examples where fine-tuning the brief or finding a specialist manager for a part of the portfolio can be a more effective solution, considering the transactional costs of changing managers.

Investment management fees

MIFID II regulations have substantially improved the transparency of investment management fees and made them comparable on a full “look through'' basis. However, having lower fees does not necessarily mean better and it is important to understand what exactly you are paying for in terms of active management and expected outperformance. That said, excessive fees can have a substantial detrimental impact on returns over long periods of time. As a rule of thumb, if total expenses for a medium-size multi-asset charity portfolio exceed 0.80% of assets under management, it is definitely a call for a more detailed analysis.


Notoriously, more managers have been sacked for poor service quality than actual investment performance. Efficient funds’ administration is incredibly important, as is building a trusting relationship with fund managers to ensure that investment committees have all the support they need to navigate the market cycles. However, there are many different ways of finding an optimal solution for any particular charity, involving fund administrators and investment consultants. Best manager presentations and bespoke service do not always mean best investment returns.

This article was published in CFG Finance Focus October 2021 and written by Tatyana Mursalimov

About PMCL Consulting

PMCL Consulting has a dedicated focus on not-for-profit and public sectors, acknowledging their specific investment needs and understanding the complex dynamics of charity trustee boards and investment committees. Our team brings together extensive experience in the charities sector with a solid investment background and analytical framework. If you are interested on finding out more about how we can help you then drop us an email or call us.

T: +44 (0)207 866 2534

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