Why should we invest?
Currently, Imperial College Union combines its cash with College’s short-term cash in order to obtain a better interest rate that it would on its own. We also have a small portion held in a pooled fund managed by M&G called ‘Charifund’, which combines investment pots from various charities to invest on their behalf. This generates a slightly better return than our cash holdings to further fund the Union’s services and activities for its members.
The Union believes that we can gain more from our unutilised cash by investing it, especially as it is currently losing its value with regards to inflation. Therefore, we are reviewing our long-term Investment Strategy to ensure that we can greater benefit our members. This is represented in Our Strategy 2017-20 under an objective to develop long-term financial strength through a balanced investment plan.
What are we investing?
Imperial College Union is governed by a Board of Trustees, which has a duty to be financially responsible while ensuring we meet our charitable objectives.
The Board achieves this by approving an annual budget. The budget sets out how much we will spend on certain activities, services and events and how we will gain approximately the same amount in revenue, from areas that include our commercial services and charitable grants. Each year, the Board chooses whether to:
- generate a surplus,
- aim to break-even, or
- run a deficit, by expanding our services.
More information on the Union’s budget, income and expenditure will be available in an upcoming infographic.
Any surpluses are stored in a pot called our ‘Reserves’. Reserves are an important safety net for charities. It is best practice for charities to build up reserves that would enable them to continue operating in times of difficulty.
The Board has set a target of generating reserves of £1.2m; as of 31 July 2017 our reserves were approximately £840,000. This amount will enable Imperial College Union to continue operating for a short period if our business model was significantly disrupted.
Additionally, the Union manages the finances of our Clubs, Societies and Projects (CSPs). As a result of this, all our CSPs are required to manage their finances through eActivities. CSP money is accounted for separately from our bars and retail, as they are ‘restricted’ for CSP use only.
As of 31 July 2017, this CSP account totalled approximately £981,000. This amount fluctuates throughout the year, due to the various activities CSPs undergo, but this balance has never fallen below £750,000 since July 2013. This means £750,000 of contingency CSP money has not been touched in 4.5 years. This is equivalent to each CSP having just under £200 in their account at any one time.
This means we can safely invest a proportion of the CSP account that would otherwise be doing nothing, and potentially losing value with regards to inflation. This amount would only ever be called upon in extraordinary circumstances. We can use this money to generate a return that can be used to benefit our CSPs and our entire membership
However, CSPs should not worry, as all of your money will still be available to you whenever you need it, within the existing policies on expenditure. This is managed by our Investment Strategy. We will ensure that there is an appropriate level of investment in cash, which is the most flexible-to-withdraw vehicle available. To ensure that if needed, we can cover any expenditure our CSPs may want to make.
How should we invest this money?
The Board of Trustees is seeking your views on how to invest this money. We are aware that this topic is of great importance to our members, as shown by a paper brought to Union Council last year by Rhidian Thomas (Ethics & Environment Officer 2017/18) related to this issue and the Divest Imperial campaign supported by the Union. Therefore, we would like to take this opportunity to hear your thoughts before we make our final decision.
A Panel, chosen by the Board, will take into consideration the ethical overlay available, risk, return and cost of each of the options. But we would like to know your views to help shape the ethical overlay we will apply to our Investment Strategy.
Generally, the more restrictions imposed by an ethical overlay, the fewer investment options that are available. This will make our investments riskier and potentially less profitable. A stricter ethical policy may also incur increased costs, which will take away from any returns generated. These factors may mean we will miss the targets set by the Board for the Investment Strategy, the aim of which is to further support the services we offer our members.