2018 Investment Fiduciary Checklist

By Jason Palmer, Senior Managing Consultant with PFM

In working with clients, we at PFM have found establishing an annual investment checklist with boards to be a valuable tool to help effectively monitor the key activities of a foundation’s investment program. Even for organizations with dedicated investment staff or investment committees, establishing an annual checklist enables boards to set an investment agenda for the year. This proactive approach helps to maintain a disciplined structure for evaluating new investment strategies and changing donor needs along with benchmarking key success drivers to help ensure that the investment program is managed in an efficient and effective manner.

To that end, we have provided a list of seven key items and questions that may help your board develop its own annual investment fiduciary checklist.

1. Revisit the Spending Policy

• Is it flexible and structured for the long term?
• Does our organization rely greatly on the income generated from the endowment portfolio?
• How could future investment market performance influence our spending plans?
• Have we evaluated different methods of calculating spending policy?

2. Update the Investment Policy Statement

• Have we created a process to annually review the investment policy statement?
• How might the implementation of new investment strategies affect the policy?
• How does our investment policy structure compare to our peers?
• Have we adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) in our policy, if applicable?

3. Discuss any Regulatory/Financial Reporting Updates

• How will the new tax plan impact the economy and, ultimately, our program?
• How will the new tax plan impact our donors?

4. Perform an Annual Fee Benchmarking Study

• What are our total investment expenses (advisor, fund managers, custody and trading fees)?
• Are the endowment’s investment returns greater than our annual investment fees over time?
• How might we adjust the portfolio to help drive down investment expenses?
• Have our alternative investments been beneficial net of fees over more liquid options?

5. Assess Investment Performance vs. Foundation Objectives and vs. Peers

• Do our performance benchmarks accurately measure our strategic investment goals?
• Are the portfolio returns exceeding performance objectives over three-, five- and 10-year periods?
• How do our returns compare against our peers or others with similar long-term goals?
• How do we evaluate whether or not our portfolio is still structured appropriately to achieve our long-term expectations?
• Are donors pleased with the returns? Does our staff have the resources and expertise to answer donor questions about performance?

6. Evaluate Investment Committee’s Governance Structure

• Does the investment committee have the breadth of resources and time to efficiently make timely decisions for the endowment portfolio?
• Have we documented procedures to effectively onboard individuals as they transition onto and off of the investment committee?
• Should we use a consulting or discretionary advisor model? What’s the difference?
• Have we considered performing an independent review of our investment program and policies within the past three to five years?

7. Learn About New Investment Topics and Trends

• Is socially responsible investing (SRI) or impact investing right for us and our stakeholders?
• How can we successfully navigate a rising interest rate environment?
• Is our alternatives portfolio full of equity risk or credit risk?
• Should all endowed funds be invested using the same asset allocation?
• What conferences/seminars should our board members attend to facilitate the exchange of ideas amongst peers?

About The Author

Jason Palmer is a Senior Managing Consultant with PFM. PFM is the marketing name for a group of affiliated companies providing a range of services. All services are provided through separate agreements with each company. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. Investment advisory services are provided by PFM Asset Management LLC which is registered with the Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. A copy of PFM’s Form ADV, Parts 2A & B is available upon request. For more information regarding PFM’s services or entities, please visit www.pfm.com.

Jason can be reached at 312.523.2421 or palmerj@pfm.com.