What is our committee responsibility and liability?

You have a Mission Statement that answers the question “WHY is your organization in existence?” You know your strategy which answers “WHAT is your organization going to do to deliver its mission?” The investment process essentially defines HOW decisions will be made for the fund.  The process answers the tactical “how” questions about the investment program.  How will you decide your asset mix?  How will you invest within each asset class?  How will you measure the results? How will you rebalance and reallocate after the results are in?  How will you chose a management approach and who will manage the investments?

The Investment Committee is responsible for controlling the investment process and is the touch point in the organization for reporting the results.  It should also be communicating the range of expectations to the board so that they can provide guidance to other areas of the organization.  If the fund is a pension fund or other employee benefit fund, there is liability to the beneficiaries that must be considered.  Many funds of this type hire professional management to give them a layer of protection for their personal liability in that regard.  Some even hire consultants to hire professional managers, giving them two layers of protection (but more expense).  If the process is defined well, that will also give a measure of protection, not just of liability, but that the responsibility is handled seriously and well.

For other types of plans (corporate, endowment, etc.), there are fewer legal liabilities, but just as many good reasons to provide great management and oversight.  Having an endowment that is predictable and a plan for distributions that is not volatile, is the goal of most such plans.  Yale University devised some smoothing calculations that would deal with the inherent volatility of the investments in the plan to create a smoothed distribution pattern that fit the planned expense budgeting growth and the budgeting process of the university.  It has been dubbed the “Yale Plan” and there are many other modified versions (“Modified Yale Plans”) that are tailored to an individual organization’s needs.

Hartline can assist in coaching your organization as part of the investment process.  The role Hartline plays is dependent on the needs of the organization and the strength of the committee.  We are glad to have a dialog about how we can help.