A significant majority of the investment committees of U.S. endowments and foundations have retained approval of their funds’ asset allocation policy (85%) and investment policy and objectives (82%) as part of their governance policies.
However, 44% of investment committees have handed money manager hiring and termination decisions to internal investment staff, the results of consultant NEPC’s Survey on Endowment and Foundation Governance showed.
Among other investment-related duties, 66% of endowment and foundation committees have turned over to staff discretion for other vendor hires and terminations; money manager guidelines, 51%; and rebalancing, 45%.
The new survey, conducted in April and released Tuesday, said 54% of committees still must approve the spending policy and 44% control the mission statement of their respective endowment or foundation pools.
Small governing bodies of between four and six members are considered better by 53% of respondents; 39% said their investment committee is composed of seven to 10 members.
Endowment and foundation investment officials also identified their investment committee’s biggest challenges, with 24% indicating that the timeliness of decision-making is a problem, followed by the time commitment of board members, 22%; lack of investment expertise, 15%; committee diversity, 13%; information sharing, 6%; and weak committee chairs, 3%.
Finally, the NEPC survey stressed that while 92% of respondents said they think the diversity of their investment committee is a “critical factor for success,” it isn’t the top criterion for selecting new committee members. Investment knowledge, business experience, and different opinions and expertise from existing committee members are the most sought-after qualities in new investment committee members.