An investment committee is the cornerstone of an institutional investment program. At Global Endowment Management, we have observed that a committee's ability to translate its institutional mission into the language of financial goals, asset allocation and portfolio oversight shapes the probability of long-term success to a greater extent than any other variable. As a leading outsourced chief investment office with more than 15 years of experience partnering with investment committees, we have found that a sound portfolio strategy, a high-quality investment team or an expert board of trustees are all powerless against a dysfunctional investment committee.
Despite widespread consensus on governance best practices, many institutions struggle to implement them effectively. These deficiencies can exact a heavy toll: a loss of integration between the investment portfolio and an institution's needs, a bias to change or act when patience is the wiser course and a misallocation of time and attention.
For committees eager to structure for success — by placing the right people in the right roles, by clarifying the group's mandate and by establishing the rules of engagement — below are a few insights and suggestions to avoid common pitfalls.