Charity Cash Management

Charity cash management: making your short-term money work harder

Charities often hold cash reserves for good reasons. You may be building up funds for a planned project, setting aside money for future commitments, or keeping a financial buffer for unexpected costs. But when cash is likely to be needed within the next few years, it can be worth asking whether it is working as effectively as possible.

The Castlefield ‘diversified liquidity strategy’ (DLS) provides an easily-accessible option to manage cash. Find out more below.

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What is a cash management solution and how does it work?

Cash management solutions help charities make better use of any short-term cash holdings that may be needed within the next few years, while maintaining easy access to their money.

Instead of leaving it all in a single bank account, the Castlefield DLS takes a different approach, investing in funds to access a range of carefully selected, high-quality short-term ‘cash-like’ holdings. The aim is simple: to help protect the value of your money, provide quick access when needed, and deliver a potentially higher return than a typical savings account.

Unlike a fixed-term deposit account, there is typically no lengthy notice period. Funds can usually be accessed within days, giving charities flexibility when cash is needed for operations, grant-making or new opportunities. Interest is credited monthly and can be withdrawn or reinvested according to the charity's needs.

The aim is simple: preserve capital, provide quick access to cash and generate a competitive return.

The benefits of a cash management solution

One of the biggest advantages is diversification. Instead of relying on a single banking institution, a diversified liquidity approach spreads investments across a wide range of assets and issuers. For example, one fund used within the strategy is diversified across around 200 securities from 50 different issuers, helping to reduce concentration risk.

Charities may also benefit from the potential for higher returns than are typically available from many high street bank accounts, while retaining a cautious investment approach focused on short-term cash management.

The Castlefield DLS also offers an ethical advantage by applying an ethical screen to consider environmental, social, transparency & governance criteria. This promotes a minimum accepted standard, by excluding exposure to activities such as tobacco, weapons and gambling. Exclusions also apply to companies which have violated minimum global accepted standards of good business practices. Note that these standards may not apply to any one mainstream banking institution with which a charity might typically deposit its funds.

The Castlefield DLS also offers an ethical advantage by applying an ethical screen to consider environmental, social, transparency & governance criteria.

Important Considerations

While the objective is to protect the value of your money and keep it readily available, this is still an investment solution rather than a traditional bank deposit. As with any investment, capital is at risk and returns are not guaranteed.

A diversified liquidity solution is typically most suitable for money that is not required immediately but may be needed within the next five years (NB: Castlefield’s DLS is focused on a 1-5 year time horizon). It can sit alongside a charity's longer-term investment portfolio, helping trustees organise reserves according to different time horizons and financial objectives.

Is your charity's cash working hard enough?

If your charity holds substantial cash reserves, now could be a good time to review where those funds are held and whether a diversified short-term cash management solution could offer greater flexibility, diversification and potential value.

If you’d like to explore the options available and determine what is appropriate for your charity's needs, please get in touch to speak to a Castlefield charity specialist.

Ways we can help your charity

Supporting trustees with the development of your investment policy
Advice on the execution of your investment strategy
Helping your charity to invest in line with its mission and values
Establishing and managing a suitable investment portfolio
Monitoring performance
Setting up regular withdrawals if required to support your charity’s mission
Keeping you and your trustees updated on developments within the sector

We understand the sector like no other

Charities have always been at the heart of what we offer. That's because we're part owned by a grant-making charitable foundation. Many of our team are active volunteers or trustees within the third sector, so we understand the challenges that charities face.

We were established in 2002 to manage the investment needs of the charity sector - many of our early charity clients have chosen to stay with us for over 20 years.

Today, Castlefield is an award-winning, employee-owned investment management and financial planning group, that's recognised for being at the forefront of values-based investing.

Charity Cash Management