Entrepreneurial academy trusts are taking advantage of their cash freedoms to make six-figure profits by investing in stocks and shares, a Schools Week investigation has found.
The Brooke Weston Trust, which runs ten academies, has made £176,000 interest after putting £1 million of its reserves in an investment fund.
The fund is managed by HSBC, which invests the cash in stocks and shares. The trust said it was a “low risk” investment – similar to that used by charities to boost financial returns on surplus cash.
Brooke Weston has no set date to withdraw the money, but said it was a “safety net in case one of our schools has an unexpected cost that needs immediate action”.
The National Audit Office has also estimated schools will have to make £3 billion savings by 2020
The Public Accounts Committee heard this week from headteachers who said they had “cut teaching to the bare bones” to meet budget pressures.
The National Audit Office has also estimated schools will have to make £3 billion savings by 2020.
But an analysis of the latest annual accounts for ten of the largest academy trusts shows at least three appear to use similar investment strategies that involve some risk.
Phillip Reynolds, a senior manager at Kreston Reeves auditors, said more trusts were likely to consider investments at a time of low bank interest rates.
The strategy “makes sense and is a logical thing for a trust to do. It’s nice if you have £1 million that you can spare and put in an investment and get some really good returns. However, other schools or trusts can’t afford to take this risk.”
Brooke Weston said its reserve was mostly from selling online resources at its founding school. Investing made better returns than a normal high street account, it said.
Debbie Tysoe, its finance director, said: “This means that our money works harder and we have more to invest into our schools, as and when the need arises.”
The account was regularly monitored; if returns fell below an “acceptable rate” the trust would transfer its cash, she said.
“However, this particular account was carefully chosen as, being a charity investment fund, it offers the lowest risk possible while giving a reasonable return.”
ARK, which runs 35 schools, also has an arrangement with JP Morgan to make longer-term investments. A trust spokesperson said any cash invested through this route was from charitable donations. It could not provide figures for how much it had invested.
Accounts for the David Ross Education Trust show it has made investments in the “money market” (trading in short-term loans) and corporate bonds.
The trust said it invested cash from the £2 million endowment fund set up by its sponsor, the millionaire businessman David Ross.
Accounts show it has made £236,000 on investment income in the past two years. This money helped to top up a fund offering interest-free loans to trust schools for capital projects, a spokesperson said.
United Learning also invests “temporary surplus” cash in an official charity investment fund.
The Department for Education pointed Schools Week to the academies financial handbook that says trusts may invest to further their charitable aims, but must make sure the risk is “properly managed”.