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.
Strong returns from leading university endowments have reignited discussion about how institutions can sustain performance in a shifting market environment. In commentary for The Wall Street Journal, GEM’s Co-CIO, Matt Bank, reflects on how endowment leaders are preparing for more uncertain conditions ahead.
In a recent Q&A with Buyouts’ Chris Witowsky, GEM’s Caroline Dallas, a Director in our Investment Research Group, shared her perspective on how recent private equity market shifts are influencing talent dynamics, emerging manager activity, and LP appetite across the lower mid-market.
Sourcing and manager selection typically get top billing in conversations around private investments, but one underappreciated aspect of a successful private allocation—explored in our recent whitepaper—is the art of pacing commitments to ensure appropriate portfolio allocation.
Let’s start a conversation about how we can help.
