What the Charity Commission Expects from Trustees on Investments

CC14 — the Charity Commission’s guidance on investment of charitable funds — sets out the framework within which charity trustees are expected to operate when managing investments. It is not optional guidance. It represents the Commission’s view of what good trustee behaviour looks like, and departure from it creates governance risk.

The core duties CC14 establishes

CC14 identifies three primary duties for trustees with investment responsibilities. First, the duty to invest — to ensure that any funds not required for immediate use are invested appropriately. Second, the duty to act prudently — to invest in a way that is in the best interests of the charity, taking advice where the board lacks expertise. Third, the duty to act in accordance with the charity’s governing document — including any restrictions on the type of investments the charity may hold.

Taken together, these duties require trustees to have a genuine understanding of how their charity’s assets are being invested, what they are costing, and whether the arrangement continues to serve the charity’s interests. Delegating investment management to an external manager does not discharge this responsibility — it transfers day-to-day decision-making, not oversight.

The Investment Policy Statement requirement

Where a charity has delegated discretionary investment management to an external manager, CC14 is clear that an Investment Policy Statement is required. This document must set out the investment objectives, risk parameters, ethical restrictions, and the basis on which performance will be assessed. It provides the framework within which the manager operates and the standards against which the board holds them accountable.

Many charities hold an IPS that was drafted years ago and has not been reviewed since. This creates a gap between what the document says and how the charity is actually being run — a gap that would be significant in any regulatory scrutiny.

“Trustees who have never benchmarked their manager’s performance, or cannot confirm the fees they are paying, are exposed to reputational and regulatory risk — even where there has been no failing on their part. The gap is the absence of documented oversight.”

Performance and fees: the oversight gap

CC14 encourages trustees to challenge their investment manager, review performance against appropriate benchmarks, and understand the costs they are paying. The ARC Charity Indices provide a recognised benchmarking framework for this purpose — one that allows trustees to assess whether their manager is delivering performance in line with, or better than, peer charities at the same risk level.

In practice, many trustees have never received a benchmarked performance report. Their manager provides returns data, but without a comparator, it is very difficult to form a view of whether those returns are good, average, or poor relative to the market. CC14 anticipates that trustees will have this framework in place.

Seeking independent advice

One of CC14’s most important provisions is its active encouragement for trustees to seek independent advice when they lack the time, knowledge, or inclination to act alone. This is not an admission of failure — it is what responsible governance looks like. The Commission expects boards to recognise their limitations and to take steps to address them.

Adena Street provides independent governance and financial guidance to charity trustees precisely within this framework. The starting point is always a review of what the charity currently has in place — IPS, performance reporting, fee structure — and what steps would bring the board into a well-documented, defensible governance position.