Investment assets were worth £91.8bn, generated £3.4bn worth of income and cost £0.5bn to manage
- Investments are assets primarily in the form of equities, government securities, unit trusts and investment property. They provide an independent income source for voluntary organisations with assets to invest.
- The sector’s investment assets were collectively worth £91.8bn in 2015/16.
- This comprises 79% of the sector’s fixed assets and 76% of total assets.
- The sector’s investments assets generated £3.4bn worth of income in 2015/16.
- Investment income represents around 7% of the sector’s total income of £47.8bn.
- 61% (£2.1bn) of the total investment income comes from returns on financial assets such as share dividends. Almost a third (30%, £1.0bn) comes from rents on investment property, and the remaining £0.3bn consists of interest on cash holdings.
Cost of managing investments
- In 2015/16, the sector spent £0.5bn on managing investments.
- This represents 8% of the money spent on generating funds and 15% of the income generated from investments.
Larger charities have larger proportions of investment assets within their fixed assets
- The distribution of assets in the sector is uneven: large, major and super-major organisations comprise 3% of the total number of voluntary organisations but hold 90% of the sector’s investment assets.
- More than half of all fixed assets are investment assets, in all income bands. However, the larger the charity, the larger the share of investment assets: 86% of the fixed assets of super-major organisations are investment assets, compared to 62% for micro and small organisations.
- Over 63% of voluntary organisations had some form of investment income in 2015/16.
- Investment income is the largest source of income for 15% of the sector. Investment income as a proportion of total income is higher for micro and small organisations (16%) than large organisations (10%) and major and super-major organisations (4%) although they are less likely to hold investment assets.
- This suggests that smaller organisations are more likely to rely on the assets they hold, while larger organisations benefit from a more diverse range of income sources.
Since 2011/12, investment assets have increased slowly, while the return on investment has stayed stable
- The voluntary sector, like other sectors, was affected by volatile asset prices following the financial crisis of 2008. The fall in the stock market together with a fall in property values dented the value of investment assets in 2008/09 with the sector’s investment assets falling by 26%.
- They have recovered slowly since then, and almost reached pre-crisis levels, with investments assets worth £91.8bn in 2015/16.
- Following a drop in 2009/10 (£2.7bn) the sector’s investment income slowly increased and reached £3.4bn in 2015/16, the same level as in 2005/06.
- Despite fairly steady levels of investment income for the sector, investment income as a proportion of total income decreased from 10% in 2000/01 to 6% in 2009/10 (with a sharp decline in 2008/09). It has remained steady at around 7% since 2010/11.
Cost of managing investments
- In 2015/16, every £1 spent on investment management generated £6.79 in investment income, excluding capital gains in asset value.
- Except for a sudden and unusually high level of £12.60 in 2008/09, the return on money spent managing investments has remained between £6 and £8 since 2005/2006.