Thanks to greater focus on compliance, governance and regulation, investment committees at pension plans, endowments and foundations are getting much needed attention from their sponsors.
Keith Hocter, a co-founder of Montclair, N.J., investment consulting firm Bellwether Consulting, said working with institutions on their investment committees has become one of his firm's most common engagements.
"In part it's because there's more attention to the subject right now given things like litigation," he said, referring to the fact that investment committees have been sued for failing to uphold their fiduciary duty when managing assets.
"But even that aside, in the normal course of running an organization, you have personnel turnover, reorganizations in which functions and responsibilities get moved around," Mr. Hocter said. "It's surprisingly easy, even in big, well-run organizations, for things like the investment committee to get off track."
Steve Voss, a principal at pension consulting firm Ennis Knupp & Associates, Chicago, said he also is getting more requests for help reviewing investment committees, particularly from public plan sponsors. Those requests typically result from a fiduciary audit or governance review by the institution, he added.
Investment consultants agree that two key factors can prevent an investment committee from running aground: the chairman and the agenda.
Committees that are most effective have strong leaders who understand all the issues the committee faces — investments, fiduciary responsibilities, managing external relationships — and can build consensus and move the decision-making process along. In addition, meeting agendas focused on making decisions rather than on reviewing material will lead to more effective committees.
"The leadership function of any well-structured committee is critical," Mr. Voss said. "We tend to try to focus on agendas that are action-oriented and not simply a review of data that by the time we have a meeting is relatively stale."
Other experts said an effective investment panel needs more than just a strong leader and agenda.