The Investment Committee Guide to Prudence
Increasing the Odds of Success When Fulfilling Your Fiduciary Responsibilities in the Administration of Pension/Investment Assets
by Jonathan J. Woolverton, CFA
GENRE: Non-Fiction
BLURB:
JJ's investment career spans more than five decades. He has been the chief investment strategist for a pension plan sponsor, a managing director and senior consultant within a global investment planning consultant firm, and a managing director and chief operating officer of an investment management organization. Over his career, JJ has attended well over a thousand investment committee meetings as a plan sponsor, a consultant, and a money manager. In the majority of these meetings, he has found that committee members lack three things: in-depth investment expertise to effectively carry out their fiduciary responsibilities, the necessary time allocation to administer and manage the investment program in the best interests of the beneficiaries, and the ability to develop an efficient monitoring system to hold all service providers accountable for the products and services they provide.
This book outlines the steps to be taken in establishing investment policy; formulating asset mix strategy; creating an appropriate investment management structure; undertaking investment manager searches; and highlighting the conflicts of interest, biases, and self-interests of the various service providers.
This book is designed to assist members of investment committees in their role as fiduciaries/trustees/administrators.
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Excerpt:
The investment committee has three main functions:
1. return: to create an investment program to achieve the goals and objectives of the fund as a whole;
2. risk: to determine the risk parameters (i.e., the ability and willingness to tolerate the risks involved in achieving the desired
return objectives); and,
3. cost: to ensure that the overall costs of implementing the investment program are reasonable, given the expected outcome.
The investment committee’s fiduciary responsibility presents challenges for committee members. Because money management may be the most uncertain business in the world, the most important decisions that investment committee members make are in selecting and weighting various asset classes (known as the asset mix policy). The asset mix policy is based on forecasts of the longer-term rates of return for the various components of the capital market, the volatility of the returns of each asset class, and the correlations of one asset class to another.
For investment committee members, the investment business hinges on beliefs about the following questions:
• Will the components of the capital market behave as they have in the past, given the historical relationships between return, volatility, and correlations?
• What is the expected inflation rate for the next 20 or so years, and how will this forecast affect the anticipated fund results?
• If choosing active management and investment strategies, can investment managers deliver cost-effective, above-benchmark returns as in the past or as promised, and do committee members have the experience and skill to select these managers?
From the investment side, money management firms operate in an environment of incomplete information. The markets are driven by events that are somewhat random and, as a result, unpredictable.
In summary, all major decisions that the investment committee members are going to make are based, mainly, on uncertainty.
AUTHOR Bio and Links:
Jonathan J. Woolverton, CFA, has spent his whole career in the investment field—over fifty years. After graduating from university in Pennsylvania, he moved to Toronto, Canada, where he began his career in the investment department of an insurance company. In his role as investment officer he was responsible for formulating investment strategy and overseeing all investments within the equity and fixed-income divisions. JJ later joined Ontario Hydro as their chief investment strategist where all pension funds were managed internally.
JJ left the money management business to become an investment planning consultant. He was a founding partner and managing director of Frank Russell Canada. He moved back to the money management side as the managing director and chief operating officer of Guardian Capital Inc. JJ graduated from Westminster College with a BBA and achieved his Chartered Financial Analyst certification. JJ has published numerous articles on the pension and investment industries and has been the keynote speaker at many conferences and seminars.
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5 comments:
Sounds like a very interesting read.
Sounds interesting.
Great blurb
The book sounds very interesting. Thanks!
nice cover
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