Roger Chester reveals more about his plan to create an institute to provide impartial fund management assistance and advice to charities.

Some of you will know that I recently attended the Endowment Asset Management Programme (EAM) at the Judge Business School in Cambridge. Whilst there, two drivers led me to the conclusion that long-term not-for-profit investment management education in the UK needs to be expanded on to a more formal basis. I say not-for-profit rather than charity as I want to meet the needs of as many organisations, including foundations, family offices and other not-for-profits, and their staff as possible, and not restrict the institute to charities alone.

The two drivers were, firstly, learning about the existence of the Commonfund Institute in the USA, and secondly, an awareness of the ever-increasing need for sound investment management in the sector. One only has to look as far back as 2007 to see how markets have collapsed, reformed and changed direction and the impact this has had on not-for-profit investors, most of whom, however they account for it, rely on investment income to deliver their mission.

Let me say at the outset that I am not decrying the work of investment firms in this area or indeed existing state sector providers. Their work is very valuable but now I believe the time has come to take this further forward. I say this because, in my experience, many not-for-profit organisations including charities struggle in this area. Neither do I have it in mind to encourage organisations and their staff to become stock-pickers. This is most certainly not their function. What I am proposing is to help these organisations better understand, for example, the opportunities and challenges in managing assets with a long-term horizon, the governance aspects of investments and the issues in selecting and managing external investment managers.  

How the institute will operate

To begin with, which classes of organisations am I targeting and who are the people involved? Well I am thinking of organisations with an investment portfolio of greater than £10m, and the individuals concerned are the trustees and staff of those organisations together with family trust officers, investment professionals, professional advisors and regulators. I say £10m as this implies an organisation with a reasonable level of resources such as to be able to engage with the new institute. The needs of organisations with a less than £10m portfolio would be met later on.

What type of institute am I proposing and what will it do? Well quite simply, an institute based at a UK university that carries out teaching and research. The work of the institute would be to build on the existing EAM programme and its education offering, produce models of good practice and carry out research. The inspiration for this initiative is the Commonfund Institute in the United States.

How will the proposal be taken forward then? So far I have the support of Professor Elroy Dimson and Dr. David Chambers who direct the EAM programme and who have provided me with much useful guidance already, as has the Commonfund Institute.   How will this new Institute be financed? An experienced financial marketeer has been recruited to help write a fundraising plan. The next step will be to construct a list of potential funders and get the campaign under way. I will also be looking for support from my many friends in the investment community.

In conclusion, I do not underestimate the size of the task involved but the opportunity to materially assist significant numbers of charities, foundations, family offices and other not-for-profits cannot be ignored.

Roger Chester is head of finance and administration at LionHeart