Optimizing the Selection of Investment Committee Members

By October 23, 2018 May 10th, 2019 Blog Post

As we shared in Endowment Management for Higher Education, optimizing the selection of investment committee members is a crucial task that greatly contributes to endowment management success. To help committees make appropriate decisions beyond “time, talent, and treasure” considerations, we developed a grid of skills and attributes to help identify individuals for inclusion on a committee, which is a constructive way to guide thinking about maximizing the effectiveness of this group of five to eight members.

As you view the grid, please keep in mind:

1. Personality attributes are as important as subject matter expertise.

2. Seek to add two specific types of individuals: chief investment officers from similar institutions as well as non-investment professionals with good common sense and sound judgment.

3. Money management professionals are not always good committee members. While there is a benefit to having members with in-depth knowledge of certain asset classes, particularly alternative investments, there are some issues to consider. Money managers can be knowledgeable about their particular sectors, but may rarely think about risk/return tradeoffs associated with multi-asset class portfolios. There may also be a horizon mismatch between their day jobs (short) and endowments (long). Their work may also require great conviction and decisive action, which may not serve the more collaborative and inclusive nature of a well-functioning committee.

4. The most dangerous committee members are overconfident and impatient individuals who want to pursue market timing strategies and feel their voices are more valuable than others’. Committee members who are overconfident or impatient may undermine the deliberations of the committee.

5. Promote diversity.

6. Don’t consider “treasure” alone when asking people to serve. Time and talent contributions, in the right balance, can help an endowment committee achieve critical educational mission objectives.

Personality Attributes/Skills
Required
Great to Have
Not Needed
Never Needed

Love of Institution

All

Asks big picture questions

At least one

Reluctant to speak up even when they disagree

x

Speaks over others and demands their proposed action be taken

x

Willingness to listen to others’ opinions, especially when different from theirs

All

Commitment to do required work of committee

All

Tenure on Committee greater than 10 years to provide institutional memory

At least one

Tenure on Committee less than 3 years to promote new ideas

At least one

CIO experience

At least one

Attorney

At least one

CEO / Senior Business Leader

At least one

General Money Management Executive

x

Alternative Investment Experience

At least one

Diversity by gender, ethnicity, full scholarship kids / full pay kids

At least one of each

Strategic Investment Group

Strategic Investment Group:

Ken Grossfield, CFA
Chief Administrative Officer and General Counsel
kgrossfield@strategicgroup.com

Nikki Kraus, CFA
Managing Director, Global Head of Client Development
nkraus@strategicgroup.com