Date: 8 July 2026
The term is somewhat tongue-in-cheek, highlighting a succession of polished presenters, glossy pitch books and rehearsed answers to rehearsed questions. Yet beneath the theatre lies a decision that could shape your charity's financial health for a decade or more.
Whether your charity is reviewing its investment arrangements for the first time, responding to trustee turnover, or simply conducting the periodic due diligence that good governance demands, understanding how to run a beauty parade well is essential to generating good financial outcomes.
This article sets out the key considerations for charity trustees and finance leads, to help them make better decisions for their charity and its beneficiaries.
Define the brief
The most common mistake charities make is inviting managers to present before they have clarified what they actually want. The result is a parade of presentations optimised for a generic brief, none of which quite fits.
Without clearly defined and understood investment objectives, agreed among the trustees and other key decision makers, the exercise will not be as successful as it should be.
Before issuing any invitations, trustees should agree on the following key points:
- Investment objectives: What is the objective of this particular mandate and how does it fit into the charity’s overall investment strategy? Is the primary goal capital preservation, income generation, real-terms growth, or a combination of some or all of these factors and/or other factors? Importantly, over what time horizon?
- Risk appetite: How much volatility can the charity tolerate in this particular mandate, both financially and reputationally? Again, thinking about the time horizon here is critical.
- Ethical and Environmental, Social and Governance (ESG) requirements: Does the charity have exclusions (tobacco, arms, fossil fuels)? Does it want a full ESG-integrated approach, or simply negative screening? Is impact investment on the agenda?
- Fund structure preference: Are you considering pooled funds, a segregated mandate, or both? (More on this below.)
- Performance measurement: Given the above, how will the trustees know whether the manager is performing well or not? What is the performance target/benchmark, including timeframe?
- Governance capacity: How actively do trustees wish to engage with the manager? Monthly reporting? Quarterly meetings? What level of bespoke service is realistic given your fund size?
Only once these questions are answered can you write a meaningful Request for Proposal (RFP) and evaluate responses on a like-for-like basis.
Pooled vs segregated: understanding the structural choice
One of the most important decisions a charity faces - and one that should be resolved before the beauty parade, not during it - is whether to invest through a pooled fund or a segregated mandate.
Pooled funds
The main advantages of using pooled funds are that they are accessible at lower investment sizes, can allow access to multiple asset classes via a single investment, typically have lower investment management fees and remove the need for the charity to appoint a separate custodian for the underlying securities.
With respect to the disadvantages, there is no ability to customise the portfolio to your charity’s specific ethical requirements and less of a direct relationship with the underlying fund manager.
Segregated mandates
Investing in a segregated mandate means your charity's assets are managed in a dedicated portfolio, entirely separate from other clients. The manager implements a strategy designed specifically for you.
The main advantage of using a segregated approach is the ability to fully customise the mandate so that it reflects the charity’s specific requirements, including ethical exclusions, bespoke asset allocation, reporting needs and stewardship priorities.
The main disadvantage of a segregated portfolio is the higher potential costs, both in terms of management fees and in administrative complexity. Typically you will need to appoint a separate custodian to hold the securities and contract with and pay fees to the custodian separately. There is also a greater governance burden on trustees, who need to monitor the mandate, review performance and engage with the manager on an ongoing basis.
For larger charities, the additional cost of segregation is often well justified, particularly where ethical and ESG requirements are complex and require a bespoke solution.
Some charities adopt a hybrid approach. They use a segregated mandate for the core long-term portfolio, complemented by pooled vehicles for specialist exposures (such as private equity, infrastructure, or emerging markets) where direct investment is impractical at most charity fund sizes.
Where trustees intend to appoint a discretionary investment manager, the brief should be based on a clear investment policy. This should set out the charity’s objectives, risk appetite, time horizon, liquidity needs, ethical or reputational constraints, reporting expectations and the scope of the manager’s authority. The beauty parade should then test which manager is best able to deliver against that policy, rather than allowing the policy to be shaped by the most persuasive pitch.
Running the parade: structuring the process
Once your Request for Proposal (RFP) is out, you can expect a range of responses. A sensible process involves three stages.
Trustees should identify and manage any conflicts of interest at the outset. This includes existing relationships with managers, trustees’ personal or professional connections, and any adviser remuneration arrangements. Conflicts should be recorded and managed before the shortlisting and scoring process begins.
Stage one: longlist screening
Review written responses against your RFP criteria. At this stage, you are filtering for minimum requirements - things like relevant experience with similar clients, appropriate fund structures, credible ESG credentials and broadly acceptable fee levels. Aim to shortlist three to five managers for presentation.
Stage two: presentations
This is the beauty parade proper. Allocate each manager a consistent time slot, typically 60 to 90 minutes, with the same panel of trustees present for each. Provide all managers with the same brief and the same set of core questions in advance.
Key areas to probe in the presentation include:
- Investment philosophy and process: How do they make decisions? Is the approach systematic or judgement-based? How has the process evolved after periods of underperformance?
- Charity-specific experience: Do they understand the regulatory environment? Can they demonstrate familiarity with the Charity Commission’s guidance on investment? Have they worked with charities of similar size and complexity?
- ESG integration: How is ESG embedded in the investment process, not just bolted on for marketing purposes? Can they show how ESG analysis has changed a specific investment decision? What are their views on key areas relevant to your organisation?
- Team stability: Who would actually manage your money? What is the turnover of investment staff? Is the person presenting the person who will be responsible for your portfolio?
- Performance: How has the relevant strategy performed over three, five, and ten years (net of fees) against an appropriate target/benchmark? Is that performance attributable to skill or to market conditions? Is it in line with expectations given the market – strong performance for the wrong reasons (e.g. too much risk being taken) can be a red flag.
- Fees: Request total costs including custody, transaction costs, and any platform charges, not just headline management fees.
An agreed scoring framework will help trustees compare managers consistently, both when deciding who to invite to present and when assessing the final shortlist.
Stage three: due diligence and reference checks
Before making a final decision, ask to speak to a small number of the preferred manager’s existing charity clients. Ask about the quality of reporting, responsiveness of the manager when markets are difficult, and whether the service has matched the promises made at the pitch stage. The gap between the beauty parade performance and the day-to-day reality is where clients can be disappointed.
Three Common pitfalls to avoid
- Being dazzled by recent performance. Past returns are the easiest metric to present and can also be the least predictive of future results. A manager who has ridden a particular market theme may struggle when conditions change.
- Neglecting fees. A 0.1% difference in annual charges, compounded over a decade, can amount to a very significant reduction in fund value. Insist on full cost transparency.
- Failing to revisit the decision. Appointment is not the end of the process. Build in regular formal reviews, with the timetable agreed at appointment. Many charities will conduct a fuller strategic review every three to five years, but trustees should review sooner if performance, service, personnel, fees, market conditions or the charity’s own circumstances change materially.
After the appointment…
The appointment is only the start. Just as much focus is needed on making the ongoing relationship work, because that's where the rubber meets the road.
Where segregated mandates are used, it’s important to be collaborative. Share updates on your charity's strategy, beneficiary needs, and any anticipated changes in cash flow. The more your manager understands your organisation, the better placed they are to align the portfolio with your evolving needs.
Set clear expectations for reporting, including not just investment performance but also ESG metrics, proxy voting records, and any relevant stewardship activity. For charities with public-facing missions, being able to demonstrate that your investments align with your values is increasingly important to donors, beneficiaries and regulators alike.
Lastly, do not be afraid to challenge. If performance disappoints, if key staff leave, or if the service falls short of what was promised in the beauty parade, raise it directly. And if the answers are unsatisfactory, the governance process that brought you to this manager exists precisely so that you can use it again.
Final thoughts
A well-run investment manager beauty parade is one of the most valuable governance exercises a charity's trustees can undertake.
It forces clarity about investment objectives, tests the market rigorously, and, when done well, can result in a relationship that genuinely serves the charity's mission. The theatre of the pitch is unavoidable, but beneath it lies a serious process. So treat it seriously, prepare thoroughly, and the parade will serve you, not the other way around.
