Investment Oversight

It takes work and time to establish and oversee an effective investment process. Understand your fiduciary duty and seek out those who can assist you.

A Board's Key Responsibilities

Ongoing Investment Management Tasks

Getting the Work Done

Keeping the Full Board Up to Speed

A Board's Key Responsibilities 

  • Establish the foundation's investment policy and develop the IPS—The full board, an investment committee of the board, or an investment consultant working with the board/committee could take on this responsibility.
  • Manage the foundation's investments—The board, an investment committee of the board, foundation staff, or outside managers could be involved.
  • Oversee the implementation of the investment policy—The full board, an investment committee of the board, or an investment consultant working with the board/committee might handle this task.

There is no hard and fast rule about who should handle the above tasks, but there is wisdom in understanding what each task entails before making those decisions. 

Foundations will also benefit from making these decisions early on in the process. This is especially true if the foundation plans on hiring an investment consultant, as a consultant can assist with every stage of the investment process.

Resources

Creating a Strategy and Plan for Your Foundation’s Investing 

Getting It Done: The Who and How of Small Foundation Investing

Prudent Investment Practices, sharing four practices that can enable all board members to fulfill their fiduciary duties in the area of investments (Updated by Glenmede)

Investment Responsibilities and Opportunities, a general overview of why fiduciaries should play active roles in foundation investing  

Lessons Learned From the 2008-2009 Global Financial Crisis

Who Has Fiduciary Duty?

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Q&A Service

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Ongoing Investment Management Tasks

John Craig of The Commonwealth Fund suggests a number of key endowment management responsibilities for trustees or a hired professional:

  • Manage endowment cash flow to ensure funds are available for grants and operating expenses.
  • Monitor asset allocation and ensure that assets are rebalanced when necessary.
  • Ensure accurately reported quarterly and cumulative investment performance for individual managers and the endowment as a whole.
  • Ensure proper custody of endowment holdings and necessary recordkeeping on investment transactions.
  • Manage preparation of agreements with managers, mutual funds, brokers, and securities custodians.
  • Manage the investment consultant (if any).
  • Staff the investment committee, including scheduling meetings and providing advance reports on the endowment for board meetings.

Resource

 A Checklist for Foundation Investors

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Getting the Work Done

Small-staffed foundations tend to use one of five models for managing and overseeing their investments:

  1. Board Does It All ModelThe board does it all—develops the foundation’s investment policy, buys and sells assets, and monitors the foundation’s portfolio.
  2. Board and Small Staff Do It All ModelThe board and a small internal staff (in some cases involving an internal chief investment officer (CIO)) develop the foundation’s investment policy, buy and sell assets, and monitor the foundation’s portfolio.
  3. Investment Manager ModelThe board (and key staff) hires investment managers to buy and sell assets in accordance with your investment policy and oversees these managers directly.
  4. Investment Consultant ModelThe board hires an investment consultant to evaluate and hire managers to buy and sell assets in accordance with your investment policy and to oversee the managers in your portfolio. Consultants may also help the board develop the investment policy in the first place.

5. Outsourced Chief Investment Officer (OCIO) ModelThe board (with assistance from key staff) hires a firm that offers a full range of investment services on a non-discretionary or discretionary basis.

 Resource

Getting It Done: The Who and How of Small Foundation Investing

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Keeping the Full Board Up to Speed

  • The investment committee or board can use each quarterly review as an opportunity to present some information about one asset class and its impact on your foundation's portfolio.
  • Annual meetings offer a good opportunity to invite an investment consultant or manager to educate the board in addition to giving an update on the portfolio or their area of expertise.
  • If you have engaged an investment consultant, make full use of their expertise. Many consultants offer educational events for clients or can recommend good conferences to attend. If your board is large enough, you may also want to work with your consultant to personalize an educational program for your foundation.
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