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Preparing for a Fiduciary Audit

When crafting an investment policy statement (IPS), trustees, directors, and other decision makers should consider future fiduciary audits and thus keep compliance and accountability in mind. As an institutional investment consultant, my clients often ask for my assistance when confronted with a fiduciary audit. I use the following audit tests. Investment horizon An investment horizon... Read More

Investment Oversight: Lessons Learned From the Great Recession

The major themes and overall lessons learned from the 2008–2009 financial crisis include issues related to the mortgage crisis, to global financial systemic risk, the concept of “too big to fail” and related bailouts, negative impacts of overuse of leverage in investment portfolios, lack of transparency at many levels, lack of appropriate risk management, and... Read More

Investment Terminology

Investing your foundation assets effectively can increase investment returns and thereby provide additional assets to help fulfill your charitable goals. Over the longer term, good investment decisions lead to the potential for more grants and greater impact. Poor investment decisions typically lead to fewer grants and lessen a foundation’s impact. In addition, state law requires... Read More

Investment Manager Selection and Traditional Due Diligence

As would be expected, a foundation’s specific due diligence program (e.g., staffing, expertise, structure, scope) for both investment due diligence and operational due diligence (ODD) will be impacted significantly by the investment model it currently follows (i.e., investment duties managed by foundation board members, internal investment staff, an outsourced chief investment officer, or a mix... Read More

How the Brain’s Wiring Can Hurt Investment Returns

The field of behavioral finance has been a hot one of late as researchers define precisely the biases we all tend to exhibit as investors. How did behavioral finance originate? About 50 years ago, finance earned widespread respect as an academic discipline firmly grounded in economic models based on the rational behavior of humans. Over... Read More

Controlling Fees

By relying simply on stated fees, such as management fee or advisory fee, foundation trustees may be underestimating the full impact of the aggregate investment expenses because as there may be other components of investment costs that are not explicitly stated as fees. In the 1990s, when portfolio performance was beating the S&P 500, it... Read More