If you’re involved in a family foundation, a family office, or if you sit on the board of nonprofit with an endowment, you likely know something about the importance of an investment committee. In this episode, Ellie is joined by Rebecca (Becky) Wood of Fund Evaluation Group (FEG). Becky is a Managing Principal and Head of Institutional Services with FEG. She’s had a long-time relationship with Ellie’s family’s foundation and even helped establish its first investment committee more than two decades ago.
Becky is a tremendous resource. During this interview she helps us understand what great governance looks like and how to achieve it. She describes the different levels of fiduciaries, what makes up an investment policy, the importance of asset allocation and time horizon, who should be on an investment committee and tips for investment committee success.
Find Becky and learn more about Fund Evaluation Group at feg.com.
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- Episode 022: Getting Started in Family Philanthropy with Colleen Mitchell
- Episode 031: Impact Investing with Jennifer Oertel
Topics discussed in this episode:
- Intro to topic (0:38)
- Meet Becky (3:03)
- What does great governance mean? (4:25)
- Spenddown or perpetuity? (5:18)
- I have a pool of money, now what? (8:21)
- What’s a fiduciary and how does this all work? (11:05)
- What’s in an investment policy? (15:03)
- The importance of asset allocation and time horizon (16:51)
- What questions do you ask an investment committee? (18:50)
- Who is on the investment committee? (20:24)
- What does a successful investment committee look like? (22:00)
- Resources (28:53)
- How to find Becky (31:49)
- Bonus questions (32:03)
Rebecca (Becky) Wood has been an investment professional since 1987 and part of the Fund Evaluation Group (FEG) team since 1992. Becky is a Managing Principal and Head of Institutional Services with FEG. She has a BS in Arts and Science from Xavier University. Outside of her role at FEG, Becky is an Advisory Board Member with Hospice of the Bluegrass, on the Board of the Sustained Dialogue Institute and part of Xavier Finance Board of Executive Advisors.
Great Takeaways from Becky:
An investment policy should include:
- Purpose and goal to achieve your long-term mission
- Asset allocation
- Aspects about risk
- Manager selection
- Day-to-day supervision—who does what?
- Guidelines—what can and can’t be done in the portfolio?
- Benchmarking—How are your individual managers doing? How is the portfolio performing as a whole? Are you achieving spending +CPI? How are you doing relative to peers? How will you evaluate performance and who’s accountable?
Three main levels of fiduciaries:
- Governing – Board
- Managing – Investment Committee
- Operating – Investment Managers or Custodians
The makings of a successful investment committee:
- A great investment committee chair. Someone who ensures everyone on the committee has a voice.
- A strong investment policy. This document will prevent poor decisions based on emotion, especially in a down market.
- Good documentation. Show that you are making good decisions on behalf of the organization.
- Clear member terms. You want to prevent mass turnover. Maintaining some continuity is helpful.
Notable & Quotable:
You need an investment committee for any pools of money that have a long-term investment horizon in which you need good governance and guidance to do right as a fiduciary for an organization. —Becky Wood
Do you want to have a legacy that continues to good for the world after your gone or do you want to see the good being done while you are here on Earth? —Becky Wood
As a fiduciary you are speaking for the entity or organization, not yourself. —Becky Wood
The ideal size for an investment committee is 5 to 11 people. —Becky Wood
Asset allocation is the biggest determinant of your success. —Becky Wood
‘Commit’ is a very important part of being a member of an investment committee. —Becky Wood
Resources mentioned in this episode:
- Fund Evaluation Group
- FEG PDF: Building Great Governance and Fiduciary Roles
- Pioneering Portfolio Management by David Swensen
- Foundation and Endowment Investing by Larry Kochard
- Vanguard’s Sample Investment Committee Charter
- Upcoming FEG educational seminars and conferences
- Association of Governing Boards of Universities and Colleges
- Foundation Source
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If you are the next generation of family business, philanthropy and wealth, and have a topic you think we should discuss, let us know at Ellie@successfulgenerations.com.