Investment Committee Best Practices

Investment Committee Best Practices

Creating an investment committee of qualified individuals helps ensure the board fulfills its fiduciary responsibilities. This guide answers 4 key questions regarding establishing an investment committee including suggested member roles and types.

Investment Committee Best Practices

A well-constructed committee of members with complementary skills can appropriately advise the board and help organizations further their missions.

Why have an Investment Committee?

  • Stewardship: Organizations have been charged with stewardship of donors’ gifts. An Investment Committee will help ensure the assets are well-managed and instill confidence with current and future donors.

  • Shared Responsibility: Responsibilities are shared among committee members rather than falling on an individual.

  • Committee Charter: A committee charter will memorialize the details and responsibilities of the Investment Committee.

  • Delegation: The board can delegate financial oversight and decisions to a dedicated and focused committee.

What are the responsibilities of an Investment Committee?

  • Report to the Board: The Investment Committee presents an overview of the portfolio to the board and requests approval for any major changes.
  • Develop and Review IPS: The Investment Policy Statement helps meet fiduciary obligations and acts as a roadmap for oversight of an organization's assets.
  • Select Investment Advisor: Research and select a cost-effective investment advisor that has experience working with nonprofits.

  • Record Detailed Minutes: Documentation is critical. The ability to look back at why and how decisions were made in the portfolio and where disbursements went will be paramount to a successful program.

Who should be on the Investment Committee?

  • Diverse Backgrounds: Consider the contributions from each individual relative to the committee’s need to ensure the group as a whole has strong investment experience and complementary skills. Certain expertise may best be added through outside/non-voting members.

  • Staggered Terms: Member terms should be multiple years and staggered to help balance the committee’s consistency with fresh perspectives.

  • Optimal Number of Members: Typically 5-7 members is an ideal committee size for optimal decision-making but membership may depend on the size of the organization. An odd number of members is useful if decisions are split.

  • Committee Leader or Chair: Select a leader who excels at prioritizing, can build a consensus among members, and can lead the member selection process.

When should an investment committee meet and what should be on the agenda?

  • Meet Quarterly: Many investment advisors provide quarterly portfolio performance reviews. This is an ideal time to schedule your committee meetings. Also, consider scheduling prior to any board meeting so investment results can be communicated in a timely manner.

  • Advanced Materials: Materials (including last meeting’s minutes) should be distributed prior to the meeting so meeting time is spent on discussion and decisions.

  • Regular Agenda Items: Typically at each meeting the committee will approve the last meeting’s minutes, review the portfolio and performance, discuss potential investment changes, and address administration items.

  • Annual Agenda Topics: At least once a year, the committee should review committee membership, the IPS, spending needs, investment costs, and the investment advisor relationship.

Sample Investment Committee membership for a nonprofit:

Suggested Committee Member Investments Finance/
Accounting
Regulatory/
Legal
Fundraising NPO Sector Expertise
Committee Member #1
(Investment Advisor)
✔️ ✔️      
Committee Member #2
(NPO Sector Expert)
        ✔️
Committee Member #3
(NPO Business Development)
      ✔️ ✔️
Committee Member #4
(Lawyer)
    ✔️    
Committee Member #5
(Accountant)
✔️ ✔️      

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