Fall 2014 issue of Horizons

followed. Guidelines for overall risk tolerance also can be very helpful.

an Investment Policy Statement (IPS) board directions, trust or other legal requirements such as the Uniform Prudent Management of Institutional Funds Act (UPMIFA). The most important takeaway is to understand that meeting your fiduciary duties is more about the process rather than the actual results. What you do and how you document that you did it is most important!

Role of the Investment Committee The primary objectives of an effective investment committee are as follows: ∙ Establish and follow an IPS ∙ Set minimum investment standards ∙ Select and monitor investments ∙ Report ∙ Provide access to appropriate investment management services

Investment Policy Statement An IPS setting out guidelines for an endowment fund’s operation, that is

reviewed and approved by the full board of directors, is the single most important document that you can have to demonstrate that you are meeting your fiduciary duties over investments. Once adopted, it will provide an all-important framework for the work of your investment committee.

∙ Manage and control costs ∙ Avoiding conflicts of interest ∙ Oversee fund administration

The investment committee also is responsible for retaining an investment advisor, as needed.

The best investment policy statements identify:

Approach for Selection and Monitoring of Investments

∙ Purpose and objectives of the fund ∙ Responsible parties and their roles ∙ Role of the investment committee ∙ Desired asset allocation ∙ Approach to selection and monitoring of investment managers ∙ Watch list criteria ∙ Benchmarks for success ∙ Spending policy ∙ Required reporting ∙ Criteria for rebalancing ∙ Compliance with any laws and regulations If you want to exclude certain types of investments because they are contrary to the mission of your organization, those guidelines should be clearly outlined in your IPS, i.e. investments in certain products, countries or controversial practices.

One of the key responsibilities of the investment committee is to establish an approach for selecting and monitoring the investments in the fund that are consistent with its purpose, objectives, risk tolerance, and spending policy. The following are some of the important quantitative and qualitative criteria the committee might employ to evaluate the investments in the fund to demonstrate they are being prudent, assuming they have not retained an independent investment advisor to assist them. ∙ Asset size ∙ Risk adjusted returns (has leverage been utilized?) ∙ Style and consistency ∙ Performance vs. peer groups and vs. industry benchmarks Quantitative criteria might include:

Also, make sure that any restrictions presented by donors for use of their funds are

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