Fall 2014 issue of Horizons

NOT-FOR-PROFIT

∙ Consistency of performance ∙ Minimum performance history ∙ Upside/downside capture ∙ All expenses and fees

In addition, it is always a best practice to avoid any conflicts of interest with members of the investment committee, board, and staff of the organization. Consider establishing a conflict of interest policy and asking all individuals acting as fiduciaries to sign a conflict of interest agreement. Structure The investment committee may serve as a sub- committee of the finance committee, or as a separate stand-alone committee reporting directly to the board. It is recommended it be an odd-number group (5-7) whose members include those familiar with the organization’s mission, and have experience in business, finance and/or investments. It also can be useful to have both an attorney and accountant serving on the committee. How to Select an Investment Advisor If the investment committee decides it does not have the time or experience necessary to select and monitor the fund’s investments, it may decide to retain and investment advisor. Selection of a capable investment advisor and monitoring his or her performance is one of the most important assignments for the investment committee. Your advisor will help identify, prioritize and achieve the Investment Committee’s goals and objectives and develop the IPS. Look for someone who can function independently and provide objective advice and who will provide a high level of service with frequent client communication. For best results, we believe it is best to work with someone who can provide a systematic and disciplined approach to investing without trying to time the market in reaction to short- term market volatility. Through experience, we have found the best investment professionals demonstrate a willingness to educate clients about investments and are almost always relationship oriented, and not driven by transactions.

Qualitative criteria might include:

∙ Is the investment registered with the SEC ∙ Its legal structure ∙ Whether the portfolio managers invest in it ∙ Which outside professionals are used (legal and accounting) ∙ Independent board of directors and the stability of the organization ∙ The role the investment plays in the portfolio ∙ How are assets valued ∙ Redemption restrictions or limitations, manager tenure and experience, investment philosophy ∙ Where are the assets held in custody ∙ Tax and financial reporting implications Fiduciary Liability As fiduciaries of your organization’s assets, you could face severe penalties for a breach of fiduciary duties. Civil damages and penalties could be imposed, and in the most egregious cases, criminal penalties could be imposed, even jail. There are ways to limit the potential for liability. And, remember, process and documentation matters greatly. Establishing and following clearly defined investment policy guidelines is always a good idea. When the committee meets, create and distribute meeting minutes and clearly define responsibilities for future actions. Provide close oversight and monitoring, and report to the executive committee or full board on those results on a regular basis.

And, finally, you may want to consider insurance for any potential losses or events.

page 66 | horizons Fall 2014

Made with FlippingBook - Online Brochure Maker