Principles of Nonprofit Investment Management - Commonfund
Principles of Nonprofit Investment Management - Commonfund
Principles of Nonprofit Investment Management - Commonfund
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Manager Selectionor she functions. Effective activemanagement – as opposed to passive,index-centered management – nowmakes the difference to the financial life<strong>of</strong> a nonpr<strong>of</strong>it. And your effective managersshould now be given the freedomto maximize investment opportunity asthey know best.After selection and engagement, themanager <strong>of</strong> managers regularly monitorsthe “combination effect” <strong>of</strong> variousmanagers within a single portfolio.They review performance againstbenchmarks and remain vigilant forsignificant changes in any <strong>of</strong> themanagement firms.To facilitate portfolio building, amanager <strong>of</strong> managers may packagegroups <strong>of</strong> investment managers intospecific kinds <strong>of</strong> investment pools orfunds. For instance, it may create asmall-cap fund, grouping managerswith different investment styles orstrengths.It may <strong>of</strong>fer funds that represent particularstrategies. It may also create afund around a particular manager,using its group-buying position tolower fees and make that manageravailable to smaller investors than itnormally accepts.The manager <strong>of</strong> managers may, inaddition, provide related services toenhance the institution’s investmentcapabilities; services such as risk management,legal oversight, investmenteducation, integrated reporting andanalysis.Ideally, the manager <strong>of</strong> managersdevelops a working partnership withthe nonpr<strong>of</strong>it’s investment committeeand consultants, working togetherto realize the objectives set forth inthe nonpr<strong>of</strong>it’s investment policystatement.In evaluating managers, hereare some <strong>of</strong> the things you needto know:◆ The firm’s investment style andphilosophy◆ Actual evidence <strong>of</strong> its commitmentto that philosophy◆ How the firm’s decision-makingprocess works◆ The kinds <strong>of</strong> internal controlsthe firm uses◆ The quality and timeliness <strong>of</strong> itsreporting system◆ How the firm complements the otherinvestment firms working for you◆ The firm’s ownership structure◆ The quality <strong>of</strong> its senior management◆ The qualifications <strong>of</strong> its pr<strong>of</strong>essionals◆ The stability <strong>of</strong> its pr<strong>of</strong>essional staffand management◆ The size <strong>of</strong> the firm in terms <strong>of</strong> staffand assets under management◆ How the firm has changed over time◆ Its fees◆ Risk management capabilities- 23 -
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