Built to Last: Strategic Guidance for Effective Investment Committees

In this paper, authors Elizabeth Hood, CFA, and Cody Chapman, CFA, CAIA, offer advice in areas including committee membership, investment policy statements, review processes, and fiduciary training and ongoing education.

Key points include:

  • Investment committees are increasingly essential to the success of institutional investors managing trillions of dollars of assets and grappling with today’s complex and challenging capital markets.
  • Effective committees include a chairperson skilled at running meetings and seeking consensus, and members (five to nine is ideal) who understand their mission and role and embrace diverse viewpoints.
  • The best investment policy statements are soundly conceived and persistently followed.

Building and maintaining an effective investment committee is an ongoing challenge for every organization that is charged with overseeing investable assets. The roles and responsibilities will vary from committee to committee, but some best practices apply to all organizations:

  • Start with people: seek out individuals who have the time, experience, and willingness to regularly participate in committee meetings.
  • Leadership is key: select a chairperson who is willing to lead the group and help guide the committee’s activities in a productive direction.
  • Adopt a well-conceived IPS and faithfully apply it across the entire market cycle.
  • Design an asset allocation that meets the organization’s needs, and implement the decisions in the most efficient and cost-effective way possible.
  • Build a review process that focuses on the most important issues facing the committee and avoids getting too caught up in short-term performance fluctuations.
  • Finally, embrace continuing education and training as a regular exercise—some may even conduct regular self-evaluations to improve group dynamics and decision-making processes.

Ultimately, we believe these best practices will lead investment committees to better outcomes for the beneficiaries of the investment portfolios that they oversee.