Benchmarking: this refers to a way of measuring investment performance by comparing against a standard. Different standards are used depending on the type of investment.
Capital growth: this refers to an increase in the value of the investment. For example a property whose value goes up due to the property market going up or a portfolio of stocks and shares that have increased in value because the stock market is doing well. Capital growth can be temporary and will depend on the nature of the investment held.
Financial buffer:this refers to the amount of money that the charity has available to use if investments do not perform as expected – like a financial ‘safety net’ for the charity.
Financial planner: this term describes a professional adviser who provides regulated financial advice. A financial planner can help a charity select investments or an investment manager, and can help a charity by managing an investment manager interview process.
Investment consultant: this term describes a professional adviser who tends to work with charities whose investments run into many millions of pounds, such that the charity is a ‘professional investor’. An investment consultant usually gives advice on the appropriate mix of investments for a charity and helps a charity select an investment manager, by managing the investment manager interview process.
Investment manager: this term describes a firm that manages portfolios of stocks, shares and other assets on behalf of charities, among other clients. Some charities use a financial planner or investment consultant for help in selecting an investment manager. Some charities liaise directly with investment managers to manage the investment manager interview process themselves.
Liquidity: a term used to refer to how easy it is to access cash or convert an investment into cash – that is, how quickly can an investment be sold if cash is needed by the charity?
Material (or materiality): When we talk about a charity having material investments this means that the value of these investments is so significant that the overall picture of the charity’s finances or activities would be distorted if they were not taken into account. It is the responsibility of the person preparing the charity’s accounts to decide whether an item is material or not.
Portfolio of stocks, shares and other assets: a term commonly used to refer to a diversified collection of different types of investments that are grouped together and belong to an investor. What is contained within a portfolio can vary. For example, a portfolio might include a mixture of stocks and shares held in different companies, assets that generate a fixed income from governments or companies, cash and other types of investment.