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  • UK Charity
  • 2023
  • Global, multi-asset
  • GBP 80m
  • Evaluate current investment approach and identify potential areas for change
  • Strategic Portfolio Design

Our specialist says:

We supported this client with an honest review of the investment strategy, scrutinising all facets of their approach. Broadly speaking, we found no fundamental issues and the SAA and portfolio are performing in line with the investment objectives. However, there was a concern that some of the last decade’s performance vs CPI has been boosted by buoyant equity markets and low inflation, which has led to questioning whether more future robustness can be added to their current multi-asset holdings.

Client-Specific Concerns

A UK-based Charity was seeking support for evaluating their current investment approach and strategic asset allocation. Specifically, the engagement set out to evaluate the existing SAA and portfolio in respect of existing objectives and constraints, both from a quantitative perspective as well as a philosophical perspective. Ultimately, the Charity was interested in a thorough review with the aim to identify potential areas for improvement or refinement, such as asset class selection and approach to ESG.

While there were no concerns on portfolio performance, it was considered good governance to conduct an independent review of the organisation’s investment management. Is the Investment Policy Statement up to scratch? Can we critique the approach to ESG? Does the Charity approach investments in the most appropriate way? Are the current multi-asset mandates fit for purpose? Should private markets be included, and how? Can we add more robustness? Are we missing quick wins?

They engaged bfinance as an advisory partner to review their investment strategy and supporting policy documentation.


  • Investment Policy Statement: bfinance found no fundamental flaws or shortcomings in the current documentation. However, some items were worth noting and may be addressed: the absence of specific return objectives makes “success” less measurable, and the absence of some commonly included items in the IPS such as investment beliefs, liquidity requirements, investable universe and implementation guidelines.
  • Responsible Investment Policy: Areas in the Responsible Investment policy were identified that could be elaborated upon to provide sufficient granularity for managers to apply the policy to align with the Charity’s expectations.
  • Investment objectives: bfinance found that the broad investment approach and objectives stated in the IPS are consistent with those of a well-established charity. The long-term investment horizon focus on real (inflation-adjusted) value, instead of nominal value and sustainability of funds/income, is one of the keys to a successful charity investment portfolio.
  • Strategic Asset Allocation: bfinance would classify the SAA as a traditional balanced long-only benchmarked SAA. The SAA has been able to outpace UK inflation since the early 2000s. The SAA has outpaced UK inflation by a wide margin over the long-term. With an overweight to growth assets, such as public equities, it is expected that the Charity will generate an excess return over inflation over the long-term, thereby meeting the objectives set out in the IPS.
  • Investment approach: Allocating to diversified multi-asset funds was considered to be the most appropriate investment approach because it best aligns with The Charity’s available resources and governance structure, and it does not unduly constrain the investable universe.
  • Implementation: While the current implementation is argued to be appropriate and is meeting the Charity’s long-term objectives, there would be scope to reduce the portfolio’s potential drawdown profile. This may be achieved by allocating to an unconstrained balanced mandate, which would lower the portfolio’s equity beta and thereby reducing the potential severity of potential drawdowns.