Charities unmoved as stock falls
Swiss charities say they will not stop investing their money in stocks and shares despite the recent slump in the world's equity markets.
It is not only pension funds that have suffered as a result of turbulence on the world’s stock markets. A number of Swiss charitable organisations have also lost out as they seek to maximise their funds.
This may be a good idea while the trend is upwards, but as many have discovered in recent weeks, the stock market can be a volatile place.
Many donors are not aware that when they give money – to a campaign to bring food to starving people in southern Africa, for example, or to rebuild schools in the Palestinians territories – a percentage of their donation will be invested on the stock market.
Swiss Solidarity, a charitable foundation linked to the Swiss state broadcasting corporation, invests 12 per cent of its assets – around SFr17 million ($11.4 million) – in stocks and shares.
It uses the profits it makes on the stock market or on bonds to cover overheads, since it prides itself on spending every centime it receives in donations on projects.
When the equity markets were at their lowest ebb, the amount invested by Swiss Solidarity fell in value by 24 per cent. That figure is currently around 18 per cent.
But despite the recent setbacks, the organisation says it is not about to abandon this strategy, since the risk is minimal.
“It could cause short-term problems, but that is not the case since we are not in a position where we need to sell the stocks,” says Félix Bollmann, managing director of Swiss Solidarity.
“There is no speculation, no gambling. It’s a long-term investment on some of our reserves. We’ve earned quite a lot over the years with this system, and we have no reason to change this strategy,” he told swissinfo.
He says no projects have been jeopardised by the fluctuations in the stock market. In fact, Bollmann boasts that earnings from the stock market alone help to fund projects for 2,000 poor families in Switzerland every year, in addition to its other humanitarian programmes.
Projects not threatened
Other organisations, such as the Catholic charity, Caritas, and its Protestant equivalent, Swiss Inter-Church Aid (HEKS), invest some of their funds in the stock market.
Armin Zehnder of HEKS told swissinfo that this amounted to “no more than 30 per cent” of its assets, adding that none of the charity’s projects had been threatened by falling share prices.
Of total assets worth around SFr48 million, Caritas-Switzerland invests around SFr6 million in stocks and SFr12 million in investment funds. The Swiss economic magazine Cash estimated that the charity lost some SFr3.4 million on the stock market in 2001, though Caritas put the figure at SFr1.2 million.
The Catholic charity rejects accusations that it is speculating with donations or that it is hoarding money instead of spending it on projects. Like other charities that invest in the stock market, it insists that it is a crucial part of its long-term strategy.
However, playing the stock market is a risk that other charities are not prepared to take. Terre des Hommes has a policy of not investing any money in the stock market.
“We want the money donated to us to reach the people who need it as quickly as possible,” says Alain Bertrand, finance director of the Lausanne-based foundation.
“Our objective is to preserve our funds, not maximise profits,” he said.
by Roy Probert
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