Low rates 'can be an opportunity'
10 December 2008 by David Ainsworth
Borrow at low cost to invest, says expert
Well-off charities could borrow money at current low interest rates to invest in the markets, according to Andrew Hunter-Johnston, head of charities at investment house BlackRock.
Hunter-Johnston told Third Sector there was scope for voluntary sector organisations to follow the example of Clare College, Cambridge, which last month borrowed money to buy shares, and the Wellcome Trust, which issued bonds 18 months ago to acquire real assets.
But he cautioned that only organisations that were "well-capitalised, bold and have a long time horizon" would have the capability to do so.
Clare College borrowed £15m using an inflation-linked loan over 40 years, on the advice of several former students with investment experience.
The college said that it had a "unique opportunity" because of low interest rates. It predicted it would have to pay back £70m in 2048, but that it would make £36m profit.
The cut in the base rate to 2 per cent last week has hit holders of large cash deposits.
Interest rates cut means 'sector will suffer in short term'