In the not-for-profit world, investment risk has been evident for the last 7-8 years because of low investment returns and market volatility. If you are one of those fortunate not-for-profits that has the ability to set aside assets to invest, then it would be prudent to consider forming an investment committee within your board structure. Following are some best practices to follow when forming an investment committee.
| Prepare a written charter which will outline the roles and responsibilities of the members, support staff and the investment advisors or consultants and ensure it encompasses the following elements: |
- Purpose – solely responsible for developing and implementing an investment policy statement.
- Roles and responsibilities – establish investment objectives and make investment recommendations in accordance with the investment policy statement.
- Status and membership – establish who is on the committee, qualifications for membership and their roles, how often members rotate out and permanent roles for the chief operating officer within this committee. Also establish whatactions are to be taken when a member does not actively participate.
- Meetings – establish the frequency of meetings.
| Primary duties of an investment committee are: |
- Drafting investment policies for the organization.
- Hiring and overseeing the performance of an outside investment manager.
- Setting performance goals for the portfolio.
- Following the markets closely.
- Being familiar with new regulations affecting the invested assets.
- Reporting investment developments to the rest of the board.
- Advise on spending and accumulation policies.
Choosing the right committee members
First you must find members on your board who have the right experience and an interest in the investment world. There can be varying levels of skills and experience, but at a minimum these members should have in interest and basic understanding of the financial markets.
Requirement of a committee member
First and foremost each member must have reviewed the investment policy statement and understand the investment policy’s strategy.
Final thought
The committee’s responsibility is not to invest the funds, but to ensure there is a secure framework for safe investments of all applicable funds and that an independent manager manages the assets under the committee’s supervision.
Need More Information?
If you have any questions about this not-for-profit update, please contact a member of Withum’s Not-for-Profit & Education Services Group fill in the form below.
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