Not-for-profits fail to invest in their future

Following consultation with 210 not-for-profit (NFP) organisations, it has been found that an investment strategy is less of a priority for NFPs than fundraising, regulations/compliance or administration/operations.

Formal strategies outlining investment goals, asset allocation and risk appetite are more prevalent for NFP organisations with more than $25 million (75 per cent prevalence) compared to smaller organisations with less than $1 million (20 per cent prevalence).

Despite 75 per cent of organisations reporting they are ‘extremely’ or ‘very concerned’ about fundraising, few NFPs appear to be including income generating investments within their portfolios, with as much as 75 per cent of NFP portfolios invested in cash and term deposits.

These findings were part of a report published by the Trust Company.

The Trust Company General Manager Investment Management Steven Marsh says there are many options for the sector to better support their fund flows and that NFPs need to remain alert to investment opportunities to ensure they don’t miss out on a market recovery.

“An investment strategy focused on delivering consistent income by investing in quality securities can assist NFPs to better meet their philanthropic commitments,” he says.

“Capital accumulation and wealth generation are equally important. The capital base of the portfolio needs to outgrow inflation over the long term, so that income continues to grow into the future.

“While NFPs may believe they are protected from volatility by investing in cash, in a declining interest rate environment such a strategy is unlikely to meet their increasing income needs or provide protection from rising inflation,” says Marsh.