16 September 2025

Charities shifting investments to active strategies to mitigate market volatility

 

  • Charity executives managing £3.7billion say technology now gives active investment management the edge
  • Investment portfolios shifting towards equities and alternatives, research finds


The vast majority of charities expect to pivot more of their capital towards active investments amid volatile markets and shift their investment portfolios towards equities and alternatives over the next two years, according to interviews with senior charity executives conducted for Rathbones, one of the UK’s leading wealth managers.

The targeted study of 100 UK charity board directors, finance directors, investment managers and investment directors with a collective £3.7 billion of stock market related investments found that 87% expect their active investment allocations to increase, either slightly (49%) or dramatically (38%) over the next three years.

When asked why, 71% of survey respondents said because active fund managers have better insight than ever before to be able to deliver strong, market-beating returns, thanks to improved technology. Other reasons charities gave for the shift to active investments were that these tend to perform better in volatile markets (55%), greater innovation in the active management sector (49%), active strategies becoming more transparent (48%) and fees for active investments becoming more competitive (41%).

Charities already have large active portfolios, the research found, with 50% of charity executives surveyed reporting 25-50% of their investment portfolio being active, and 26% say it is between 50-75%.

Just over a third (35%) of charity executives surveyed said between 10-25% of their portfolios are in passive strategies. Four out of 10 (42%) said they have between 25-50% of their portfolios in passive investments and 19% have between 50-75%.

Andy Pitt, Head of Charities at Rathbones, said: “It is encouraging to see charities becoming increasingly confident about the role that active investment can play in supporting their long-term goals. With better technology and data giving managers clearer insights, many feel active strategies can now deliver stronger returns while also helping them navigate uncertain markets. At such a challenging time for charities, this isn’t just about numbers on a balance sheet, it’s about protecting the resources they rely on and growing them in a way that allows their work to reach further and last longer.”

The study also identified some key changes in investment allocations for UK charities:

  • UK equities make up a large proportion of charities’ investment portfolios, with 73% of respondents saying they had 15-25% of their holdings invested in this sector and 23% reporting 10-15%.
  • Over the past two years, 47% of charity executives said their allocation to UK equities had risen by 5-10% - the largest shift of any asset class; close behind were non-UK equities, with 44% of charity executives reporting an increase of up to 20%.
  • Over the next two years, 88% of charities expect their allocations to UK equities to rise by between 5-20%.
  • A similar proportion (84%) think they will increase allocations to non-UK equities by up to 20%, with 93% predicting the same increase in private equity investment. Meanwhile 89% of charity executives surveyed expect to see an increase of up to 20% in hedge fund investments.

Charity executives said the reasons for predicted changes in allocations were to be better at matching assets and liabilities (56%), increase capital growth (56%), increase income (53%) and to preserve capital (37%).

Rathbones is responsible for £9.3 billion in funds under management for more than 3,000 charities. Charities have entrusted their investments with Rathbones for over 100 years, thanks to its dedicated investment managers who are accountable for every aspect of a charity’s portfolio which range in value from £10,000 to more than £100 million.

The Rathbones team, many of whom are trustees in their own right, can help navigate the complexities of charitable investing as well as offer timely advice on changes in legislation and regulation. The team manage portfolios for sustained, long-term growth to help charities achieve their charitable goals. For more information on its services for charities go to rathbones.com/charities.