March 23, 2023
Executive Summary
SELECTION
- Building a well-functioning Investment Committee (IC) is a critical step in the stewardship of perpetual assets. It determines how effectively the investment program is governed, which translates. directly into dollars and cents. But who should serve on that committee, what experiences and principles should they bring, and how the group should work together are critical questions that should be asked.
- Completing an IC composition matrix can help identify characteristics and areas of expertise that are important for IC members to possess, as well as highlight any current gaps.
- Based on our experience, the best IC members are often those that, irrespective of their professions, possess “soft skills” like open-mindedness and strong listening skills.
SIZE
- Determining the ideal size of an IC requires weighing factors that can increase or decrease the potential effectiveness of the committee.
- In GEM’s experience, a 4-5 person IC is often ideal, as it forces a level of engagement that can be lost in larger groups. Some experts broaden that range and indicate that a 1-9 person IC can be best depending on the size of the organization.
NORMS
- In GEM’s experience, establishing and enforcing strong IC governance norms is the key differentiating factor for committee effectiveness.
- GEM has put in place a number of practices to help ICs establish and maintain foundational norms like IC member preparation (reviewing all materials and submitting questions in advance), focus on long-term investment horizon, and ongoing IC member education.
Deputy CIO Matt Bank concludes his three-part series on the Endowment Model with an exploration of the attributes that will be required to effectively invest an endowment-style portfolio over the next decade.
For the second consecutive year, GEM has been named a “Best Place to Work in Money Management” by Pensions & Investments. Learn more about what sets GEM apart.
Deputy CIO Matt Bank joined Ted Seides on the Capital Allocators podcast for a wide-ranging discussion that covered Matt’s path to investing, GEM’s approach to risk, asset allocation, and manager selection, and more.
Let’s start a conversation about how we can help.
