This is the third article in the series Reflections on the past three decades of charity investing by Edward Jewson, founder and CEO of PMCL Consulting.
September is the fifth anniversary of the launching of PMCL Consulting and it has been a rather different first five years than what I was expecting, to say the least.
Tatyana and I launched the business where we work remotely, as technology had moved forward rapidly from the time when I was running Jewson Associates, my former investment consultancy firm. We outsource many of the functions that we had previously had to have in-house, such as compliance, financial control and secretarial. We also have access to research data on funds and managers which would not have been possible as little as seven years ago for a fledgling business, due to prohibitive costs of acquiring broad investment research and in manpower terms.
When the pandemic hit and the lockdown was imposed, trustees of many charities had a mass of issues to which they had to attend. In some cases, where we were about to present to investment committees to review their investment consultancy arrangements were put on hold - quite understandably. Many trustees wrestled with the quickly imposed new technology so unless a review was essential, the exercise was postponed. Trustees felt more comfortable that markets had recovered from their initial downturn and that they could, in their view, deal with more urgent matters and retain the status quo.
However, as people became more comfortable with remote working and the specific issues around the pandemic hopefully abating; a range of issues particularly relevant for charities’ investment portfolios started to emerge again. These included all aspects of ESG, particularly the whole area of climate change, the pressing subject of greenwashing and now galloping inflation: therefore trustees have had to look again at whether their investment portfolio was fit for purpose and looked externally for advice on their portfolio of investments.
The independent role of the investment consultant has become an important element of a charity's support from external advisers. We have noticed in the past nine months a surge of enquiries from charities of all sizes requiring assistance in reviewing their investment policy, strategy and underlying investment management arrangements.
Some of the questions being asked by charities to their investment consultants range from:
Is my investment policy fit for purpose and could the charity’s reputation be put at risk?
Are my strategy and the strategic asset allocation suitable and have we set the correct target and benchmarks to judge our managers by?
Is my investment portfolio reflecting the aspirations of the charity?
Am I able to make some form of impact with my investment portfolio?
I appreciate many of these issues can be addressed by investment managers on behalf of trustees but having an impartial external assessment is now becoming increasingly important. The impartiality of an investment consultant is paramount where they have “no axe to grind” - the consultant is acting on behalf of the trustees advising them and liaising with the managers on their behalf.