“Sound governance is the cornerstone of successful investing,” said Cathy Konicki, Partner and head of NEPC’s Endowment and Foundation Practice. “It’s encouraging to see that most organizations are utilizing their investment committees for the big picture decisions – asset allocation and portfolio structuring – where they are best positioned to add value.”
According to the results, the greatest governance concern among respondents is Committee Expertise (41%), followed by Timely Implementation (24%), and Process/Procedure Oversight (24%). These thoughts were also echoed when respondents were asked to list challenges for Investment Committees. Respondents felt that Timeliness of Decision Making (24%) and Time Commitments of the Committee (22%) were the biggest challenges.
These concerns notwithstanding, the survey also illustrated that many best practices are being utilized by endowments and foundations to govern their portfolios. Specifically, more than 80% focus their time on developing the appropriate asset allocation and portfolio structure for their respective organization.
On the topic of diversity, ninety-two percent think a diversified committee drives a successful investment program, with those responses split near evenly between, “diversity promotes open discussion and differing points of view,” and “successful investment programs depend on the actual diversity of the committee. “And while committees are becoming more balanced overall, with more female, minority and age diversity, only 22% of respondents stated that their Committees include “all of the above.”
In terms of committee size, most felt their committee should be smaller than it currently is; 39% of respondents have a committee size of seven to 10 members, but 53% think four to six members is the optimal size.
Other findings of the poll included:
- Investment Knowledge and Business Expertise were ranked as the most desirable qualities looked for in prospective committee members
- 45% have no term limits on committee membership
- 45% say the most important quality of an investment committee chair is to help committees maintain focus to enable the decision making process
Turning to macroeconomic topics, respondents continued their optimistic stance, with 94% saying the economy is in a similar or a better place today than it was in Q1 2014. A potential slowdown in global growth continued to be the number one threat to near-term investment performance. Concerns about rising interest rates impacting performance also increased sharply, moving from just 5% in Q4 2014 to 16% this quarter, as potential Federal Reserve action draws closer.
To view the Infographic image of the results click here.
Please click here for full results to the survey.