July 9, 2012 / 12:46 PM / 7 years ago

COLUMN-Getting serious about giving: Lipper

(The writer is Head of UK and Cross-Border Research at fund research firm Lipper. The views expressed are his own.)

By Ed Moisson

LONDON, July 9 (Reuters) - “Wouldn’t you rather your donations achieve a lot rather than a little? Then you’ll need to get serious and proactive. If you do it wrong, you can easily waste your entire donation.”

Caroline Fiennes is not one to pull her punches when talking about charitable giving, but the more I talk to her, or read her new book - ‘It Ain’t What You Give It’s The Way That You Give It’ - the more it becomes apparent that her philosophy is not all that different from that of a professional fund manager.

No self-respecting fund manager would invest in a company just because they were asked to. A fund manager will choose to invest (or disinvest) because they believe it will help their fund perform well and that the investment fits within their investment objectives. Fiennes, who advises companies and individuals on their giving, advocates a similar approach for any donor: be clear about your objective and find organisations that have done a good job of achieving this, not just the ones that market themselves well.

This is just the start. As James Caan, entrepreneur and philanthropist, puts it, “Finding, investing and supporting good businesses is hard, but identifying, donating and supporting great charities poses the same challenges.” This is all the more apt as Caan has also been the chairman of a fund manager, Insynergy Investment Management.

This is not to say that giving and fund management are natural bedfellows. A collaborative exercise between several fund groups created the Invest & Give fund (tiny.cc/xyu0gw), but sadly it did not generate significant investment and was eventually closed. Lipper data reveals that socially responsible investment (SRI) equity mutual funds in Europe have healthy assets of just over 50 billion euros, but this still accounts for less than 3 percent of the equity fund universe (1.8 trillion euros).

Yet investing and giving can learn from each other, despite their differences. Those fund managers who avoid hugging an index are clearly pro-active in their selection of investments. By contrast, charitable donations are typically made reactively.

At a simple level, most people are more likely to give to those charities that shake a tin on the high street rather than tracking down a cause they really care about. While relevant for anyone, for those giving more sizeable sums it is all the more important to make a pro-active decision.

“Start with your heart and then engage your mind,” as Rebecca Eastmond, Head of Philanthropic Services at JPMorgan Private Bank puts it. This emotional dimension is crucial: which cause really matters to you and what sort of impact are you hoping to have?


Fiennes urges potential donors not to follow the herd - a classic dictum for many fund managers. For example, she cites data which show the Donkey Sanctuary spending over 2,000 pounds a year per donkey, while mental health charities in the UK only get 714 pounds for each of their beneficiaries. Is this really where our priorities lie?

Having decided where you want your money to go, you should then decide how you want to give, or in other words, the type of change you hope to make. Fiennes illustrates the dilemma by citing the work of New Philanthropy Capital, which attempts to give potential donors a better understanding of the difficult relationship between identifiable, and satisfying, outcomes for individuals (or donkeys) and the more nebulous pursuit of a wider, and potentially more useful, impact on society. The fact is, one tends to diminish the likelihood of the other.

Listening to this being explained, I could not help but hear echoes of different fund managers’ relative emphasis on ‘top down’ versus ‘bottom up’ investment (i.e. macro vs stock-picking) and the consequences of getting these calls right - or wrong. It is also apparent that ‘bad’ giving can be equally wasteful.

Such echoes could also be heard when discussing investment objectives. Fiennes' advice is to give with no strings attached, echoing the unconstrained approach which has come increasingly to the fore in the investment industry, moving beyond hedge funds to the likes of PIMCO, for example. See tiny.cc/rtv0gw and tiny.cc/2tv0gw

She also warns against making too many demands of charities, with comments that will chime with fund companies sometimes weighed down by a constant cycle of completing requests for proposals (RFPs).

Having to complete a bespoke assessment of their activity for each major donor can be a massive burden for charities. As Fiennes says: “For sure, a charity should report on its overall effectiveness, but don’t make it write a long report just for you.”


Parallels are not always appropriate. The relative importance of costs remains hotly debated in the funds industry, where they are inevitably a drag on returns to investors. But for charities the evidence seems to be pretty clear that administration costs are no indicator of whether a charity is any good. GiveWell, an independent charity evaluator, has gone so far as to describe costs (specifically the overhead ratio) as "the worst way to pick a charity" (tiny.cc/gxx0gw)

Picking a charity is no easy task. If you thought it was difficult to decide which mutual fund to invest in (there are about 2,500 domiciled in the UK and 35,000 across Europe), spare a thought for the charities vying for your attention - there are more than 160,000 of them, according to the Charity Commission. The relative pressures on small charities compared to small funds in the UK can be seen in the following charts.

Charity incomes: link.reuters.com/bak39s - Fund assets: link.reuters.com/cak39s

Fiennes makes me squirm in my chair for suggesting that my donations aren’t big enough to make much of a difference, pointing out that over half of personal giving in the UK is by people giving less than 100 pounds a month. She argues against diversification, suggesting that I give more to fewer charities (akin to those ‘high conviction’ portfolio managers that hold a concentrated portfolio of stocks), clubbing together with others (very apt for ‘mutual’ fund comparisons), or giving something other than hard cash.

On this last aspect, such views have recently been given shape with Miller Philanthropy’s launch of the Goodwill Exchange (www.goodwillexchange.co.uk), a not-for-profit forum where professionals can register their area of expertise to provide small charities support on a project basis. Founder Gina Miller urges people to “give smarter, not just give more” with the specific aim of helping the smallest charities struggling to attract the money they need to undertake their work. In turn, spending more time on raising money can only undermine their efforts to concentrate on their charitable works.

Of course big donors can make a big difference - particularly if they give smarter. Fiennes cites the example of the Shell Foundation, which initially provided short-term, project-based support to many charities. Its grants failed 80 percent of the time. It then shifted its way of giving to finding a few charities, each of which was given a substantial investment (around 10 million pounds) over a longer period of time (normally five to seven years). The Foundation’s track record was transformed to succeeding 80 percent of the time.

Such an example shows that numbers can speak louder than words. Although what makes the numbers say what they do in this case was Shell’s change in approach, away from a quick tick in the charity box, to making their charitable giving a long-term investment. Or as Fiennes concludes, “to get your giving to achieve all it can, approach it as strategically and intelligently as you approach investing.” (Editing by Joel Dimmock)

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