The UK Charity Commission has authorised the establishment of a new Common Investment Fund for charities to be managed by Cazenove Investment Fund Management Limited under advice from Fauchier Partners. This CIF will invest in a diversified portfolio of around 25 different Hedge Funds. to be managed by Cazenove Investment Fund Management Limited.
The Trustee Act 2000 removed old restrictions which limited the investment choice for many trustees. Instead charity trustees have been given a general power of investment which can be exercised subject to a duty of care and a requirement to take advice (unless in all the circumstances it is unnecessary or inappropriate to do so). Trustees must exercise their investment powers in the best interests of the charity. In particular they must consider (and review from time to time) the need for diversification as well as the suitability of the particular asset class before making any investment. Within this framework trustees can consider investing in hedge funds.
” Diversification is an important factor in investment decisions,” says Michael Carpenter, Legal Commissioner at the Charity Commission. “Hedge Funds can provide an extra degree of diversification because they are in a different asset class to equities. Hedge Funds aren’t for everyone and caution will be required, but we think it important that this asset class can at least be considered by appropriate charities.”