Achieving Investment Excellence

CHAPTER 12Managing the Investment Management Organization

Key Take Aways

Any pension fund must have an individual or appoint an entity that is responsible for the actual implementation of the investment strategy. In a very small pension fund, this may be a trustee or an administrator who buys a few mutual funds and monitors these investments. A larger pension fund can appoint an external organization to carry out the investment strategy. This can be done in many forms, e.g. the Outsourced chief investment officer (OCIO) or fiduciary manager models. As funds grow in size and complexity, they tend to add their own professional investment staff, developing an internal investment management organization (IMO) or committee. Dedicated investment staff can add value to the investment process at any level of the operation. Funds make their own individual choices, incorporating portfolio construction, selection and monitoring of mandates or even the internal management of mandates. However, the role of the in-house IMO must be clearly defined.

We begin this chapter with a discussion of the different types of IMOs, ranging from fully outsourced to fully insourced. In this section, we also address the important question of the size of the “governance budget” for managing and overseeing the IMO from the perspective of the pension fund, i.e. the budget in terms of allocated time, resources, ...