MORE than half the local charities polled in a survey revealed they kept their money in fixed term bank deposits, despite the low interest rates. Concern about the management of charity funds has surfaced since it was recently revealed that the Hongkong AIDS Foundation had lost $1.6 million in foreign currency investments. The charities using fixed term bank deposits suffer an annual loss of about five or six per cent of their funds because of the wide gap between bank interests and the inflation rate. Financial consultants say the charities could suffer less by investing in bonds under professional advice, but should never expose themselves to high risk investments such as foreign currencies. At least six of the 11 major charities contacted in the survey invest all or a significant portion of their funds as Hongkong dollar fixed deposits, with an average return of three or four per cent. The others declined to give details of their portfolio. A director of Thomas Spencer and Associates, Mr Mark Davies, said: ''There is always a risk associated with investment into short term deposits when the interest rate is lower than the inflation rate.'' Wardley Investment Services Hongkong director, Mr Stewart Aldcroft, said the eight or nine per cent inflation rates would continue to pose a problem for charities, which could not engage in high risk investment activities. He recommended that these organisations invest in government bonds, such as the United States government bonds, which gave about a seven per cent annual return. ''The risk of government bonds is low, but it offers a return higher than cash deposits,'' he said. Five charities in the survey invested in bonds or equities with a return ranging from seven to 12 per cent. The two most profitable funds are the Sir Edward Youde Memorial Fund, set up in 1987, and the MacLehose Fund, established in 1982, which have achieved returns of 60 per cent and nearly 300 per cent respectively. The two funds and the Lord Wilson United World Colleges Fund are managed by the City and New Territories Administration's trust funds section. None of the 11 agencies in the survey were currently investing in foreign currencies. All of them said they followed conservative investment policies. The policies of a majority of the charities were decided by their executive committees with recommendations from financial experts on the committees. These charities, especially the smaller ones, said it was not easy for them to afford a professional fund manager. The four charities that had fund managers were larger, except Helping Hand. The other three were the Community Chest, the Sir Edward Youde Memorial Fund and the MacLehose Fund. The Community Chest has an independent financial analyst to oversee its two fund managers. While the Health and Welfare Branch said this week it would not give charities guidelines on investing public donations, a senior lecturer in the Department of Law at the University of Hongkong, Mr Johannes Chan Man-mun, said the area deserved an in-depth review. He said the present legislation concerning charity funds was ambiguous and needed to be reviewed following the AIDS Foundation incident and the increasing number of fund raising activities. According to the Social Welfare Department, there were 24 public fund-raising activities in 1987, but the figure jumped to 72 in 1990, 216 in 1991, and 150 last year. Mr Aldcroft, of Wardley Investment, said: ''The incident of the Hongkong AIDS Foundation demonstrates the necessity of charitable organisations seeking professional experts to oversee fund management. ''The cost of employing a fund manager is insignificant compared to the return.''