Who is batting for trustees?

In investing terms, the big decision for trustees is how much to spend.

Questions about investing strategies are much easier to define because they reflect trustees’ ambition such as CPI + 4% (the more ambitious the trustees the higher the number). Beyond this, implementation is pretty standard across most investment managers, although success varies from time to time and firm to firm. 

What’s really difficult for trustees is knowing how much to spend, and how hard to push the spending more argument. According to 360Giving over half the grant makers increased their giving by more than 10% during COVID (compared to the average spend of the three previous years). 20% reduced. Over the same three year period global stock markets increased by 18% a year. 

Everyone will remember COVID as a frightening time for investors so many would err on the side of caution, but there will have been many beneficiaries who suffered acutely because of that caution so it’s good to see so many endowments increase their spending. What has been the damage to endowments wrought by this extra spending? 

The Charity Commission is clear that the duty of trustees is to be prudent, not cautious. This means taking measured risks in a way a cautious person would not. In a world where all the advice is not to spend more when uncertain, who is supporting trustees to say, “yes, we’ll take that chance”? There is a quantum difference between what might be an existential threat for an endowment compared to the risks faced by their beneficiaries. 

At Yoke we try to provide balanced advice for trustees, weighing the risks of permanent capital loss for an endowment against the risks of ongoing damage to their purpose. Most predicted disasters fail to materialise and the ones that do tend not to be predicted so surely when in doubt it’s best to keep spending for a little too long. 

We're batting for trustees.