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Taking Stock: Holding the Investment Industry to a Higher Standard

May 31, 2018 / by Erin Faccone, CFA, CAIA, Director, Research Operations

Let’s play a quick word association game: what’s the first thing that comes to your mind when I say #metoo? I wager it’s the viral global movement highlighting sexual harassment and assault.

The growing dialog around these toxic practices and the building momentum calling for change will likely affect the investment management business as it has other industries. At NEPC, we take these issues very seriously and are committed to upholding a respectful and inclusive code of conduct. To this end, we set up a new internal committee in January to bring consistency to how we assess negative news events concerning our clients’ investment managers. While every damaging headline will be unique in its scope and scale, the committee’s role is to ensure a fair process through which these events are evaluated and communicated.

It is our belief that this committee encompasses diversity in experience and thought. Individual events will be examined using a “decision tree,” which evaluates the impact of the array of our potential responses and future outcomes. Previously, it was the sole responsibility of the investment analyst overseeing the fund manager to weigh the potential impact of a non-investment event; now, the analyst will support the committee to reach a due diligence recommendation. The committee can exercise a full range of actionable responses, ranging from No Action to Terminate. It will communicate its findings and associated actions, when and where applicable, to analysts, consultants and clients through email.

Since the committee’s inception in January, we have evaluated four situations, including claims of discrimination and sexual harassment. Two of the four resulted in a change in NEPC’s due diligence status applied to the manager. The goal is to convene the group as soon as is reasonably possible after learning of a relevant event. To date, the committee has succeeded in meeting within 24-to-48 hours of a relevant event.

The committee’s current membership comprises:

So far, we are happy with the progress made by our new committee. That said, we will be even more pleased to see fewer committee meetings.

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Topics: Operational Due Diligence, Taking Stock, Blog

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