What Charities Are Really Paying in Investment Fees

When a charity’s trustees discuss investment costs, they are usually looking at the headline management charge. This is the figure the investment manager quotes, the one that appears on the engagement letter, and the one most likely to be mentioned at a trustee meeting. It is also frequently not the full picture.

What the headline charge does not include

Investment managers typically hold your charity’s assets in a portfolio of funds — unit trusts, OEICs, ETFs, and similar vehicles. Each of those funds carries its own charges, known as the Ongoing Charges Figure. The OCF is deducted directly from the fund’s assets, which means it does not appear as a line on your statement. It reduces the value of your holdings silently.

The OCF is not hidden in the sense of being concealed — it is disclosed in the fund documentation. But it is rarely surfaced in trustee reporting, and many investment managers do not proactively discuss it. The result is that trustees often believe they are paying, say, 0.75% per year, when the true total cost including OCF may be 1.2%, 1.5%, or higher.

“In most of the reviews Adena Street conducts, the total cost of the investment arrangement is materially higher than trustees believe it to be. The difference is almost always OCF.”

Why this matters for charities

For a charity managing £2 million in investments, the difference between a 0.75% total cost and a 1.25% total cost is £10,000 per year. Compounded over a decade, that is a very significant sum — money that would otherwise be available for charitable purposes. For a charity whose mission depends on maximising the impact of its endowment, understanding the true cost of investment management is not a technical nicety. It is a trustee responsibility.

Custody and administration charges

Beyond the management fee and OCF, some arrangements include additional custody charges, platform fees, or administration costs. These vary by arrangement and are not always clearly delineated. A full cost analysis requires identifying and quantifying all of these elements.

What an independent review delivers

Adena Street provides a full cost analysis as part of its financial guidance service for charities. This means reviewing the complete fee structure — management charge, OCF across all underlying funds, custody, administration, and any other charges — and presenting trustees with a clear picture of what the arrangement actually costs. It also includes benchmarking the total cost against comparable arrangements in the market.

In many cases, this review identifies savings that more than offset the cost of the engagement. Where the arrangement is competitively priced, trustees gain the documented evidence to confirm that — which is itself a governance benefit. Either outcome serves the charity’s interests better than not knowing.

How to approach this with your current manager

An independent review does not require a confrontational conversation with your investment manager. In most cases, it leads to a more informed relationship — one where trustees can ask better questions and managers can be held to account against agreed benchmarks. Where the review identifies a meaningful cost gap, it provides the basis for a structured negotiation or, where necessary, a manager search.