The background

Ufi Charitable Trust, a charity focussed on vocational learning, originally designed its investment strategy around the expectation that it would exist for 5 years with capital being fully used up through awarding grants.  However, it became apparent that the charity would be in existence for a much longer period than initially expected and, therefore, could tolerate some exposure to long term, less liquid assets.

We were asked to advise on how to update the strategy to reflect this longer-term outlook. 

Our solution

Initially, we worked with the trustees of Ufi to develop a clear understanding of their investment beliefs and objectives.  Alongside this, we provided them with training on a range of long-term asset classes including infrastructure, private credit and emerging market multi asset funds.  This time taken to discuss the trustees’ investment beliefs and share ideas provided an essential foundation from which to formulate the new strategy.

We established the key objective of Ufi, which was to have sufficient liquidity to pay grants as they fall due whilst maximising expected investment returns and maintaining risk at acceptable levels.  In particular, Ufi had a strong preference for assets which generate a high income with some inflation linkage.

We modelled the charity’s investment strategy with a range of different asset mixes seeking an optimal balance of: income, expected return, risk exposure and liquidity.  Based on this analysis and in discussion with the trustees, we recommended that Ufi introduced an allocation to an unlisted infrastructure fund.  This brings three key benefits:

• increasing the income to Ufi;
• reducing the year-to-year volatility of the Ufi’s endowment fund; and
• enhancing the inflation-linkage of the fund’s income.

The trustees were also pleased that the investment manager is a “responsible investor” and has similar values to those of Ufi.

The results

Ufi’s trustees now have an investment strategy with increased diversification and income, which will help them meet their long-term objectives with greater stability.

Having made the decision to move to a longer-term investment objective for Ufi, the Charity’s trustees needed advice and support to understand how this change should influence the Charity’s investment strategy and to identify an appropriate range of alternative asset classes to implement this in a practical way.  LCP gave clear, reasoned advice and support to enable Ufi to successfully achieve this.

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