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.
In the second of his three-part series on the Endowment Model, Deputy CIO Matt Bank examines the incomplete quantitative arguments around endowment performance and offers a more substantive evaluation framework.
As many smaller endowments and foundations opt to outsource their investment management, the Financial Times spoke to GEM's Deputy CIO Matt Bank about how this arrangement can be beneficial to such institutions.
The first of Deputy CIO Matt Bank’s new series, The Long View, reaffirms GEM’s belief that the Endowment Model – in the right hands, for the right institutions – remains a compelling means of achieving risk-adjusted returns.
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