Falling markets cost charities billions
New research has revealed that the continuing steep decline in the stock market last year cost charities £8.6bn in lost investments.
Individual charities confirmed the gloomy picture painted in the study by Close Wealth Management (CWM), based on figures from the National Council for Voluntary Organisations.
The Wellcome Trust, the world's largest medical research charity, saw its funds suffer a huge drop from £12.1bn in 2001 to £9.3bn in 2002.
CWM, which manages portfolios for investors, said charities have about 55 per cent of their funds in various investments, of which 62 per cent is tied up in shares primarily in the UK. Charities had an estimated £29.24bn invested in shares alone at the start of 2002.
But last year saw stock markets around the world fall markedly, with the FTSE 100 index losing more than 30 per cent. It has almost halved in value since its all-time high three years ago.
CWM's chief executive, Martin Smith, said charities had seen a "double whammy", with declining investments accompanied by lower donations from the public.
He said: "There will be projects that they want to carry out that they won't be able to do now."
Falling stock markets have been accompanied by a rise in insurance premiums during 2002, which increased as a result of factors including the terror attacks of 11 Septem- ber 2001.
Mr Smith added: "Their overheads are rising dramatically with insurance premiums, for example, increasing by as much as 300 per cent, donations from individuals and companies have fallen and investments, on which charities rely for about one fifth of their total earnings are being hit by depressed stock markets."
CWM, which is part of the merchant bank Close Brothers, said charities should diversify their investment portfolios and conduct regular reviews.
Other potential investment channels for charities' cash include properties and bonds.