Achieving Investment Excellence

CHAPTER 11Establishing the Investment Committee

Key Take Aways

The board has a fiduciary obligation to monitor the investments on an ongoing basis to ensure they continue to be prudent and appropriate. It is considered best practice for boards to form an investment committee to oversee the plan's investments. Smaller pension funds sometimes argue against having investment committees, suggesting it is too time-consuming. However, size does not matter here. Under most legislations, the trustees are fiduciaries and, as such, personally liable for their actions. Having a casual approach to the important job of monitoring the investment options being provided for participants would be failing to carry this responsibility. An investment committee should help establish the right quality standards for investment policymaking as well as for implementation and monitoring.

The board can delegate a wide range of responsibilities to the investment committee. In some cases, the committee plays a highly proactive role based on an executive mandate for making investment decisions on behalf of the fund. This is often the case in relatively small funds. In other instances, the duties and responsibilities of the committee may be restricted to more advisory, policy-setting and oversight roles. This is usually when there is a professional and/or proprietary investment management organization attached ...