Investing Permanent Endowment - The Total Return Approach

The Charity Commission has launched a consultation on draft regulations that will facilitate the total return approach to investment for charities with permanent endowment funds (P E Funds), without the need to obtain consent from the Commission. Approximately 14,000 charities hold P E Funds and will therefore be affected by this change.

The current position

As a general rule, trustees who invest P E Funds can spend only the income and not the capital generated from P E Funds. As a result, trustees are unable to adopt a total return approach to investment and therefore maximise the overall return, without the need to ensure a balance between income and capital growth. Currently, trustees wishing to operate a total return require an Order from the Commission to enable them do so.