In the sector press

Successful investment governance

31/01/2018

Kate Rogers

Kate Rogers

Head of Policy and Co-Manager - Charity Multi-Asset Fund

Kate Rogers, Portfolio Director and Head of Policy at Cazenove Charities shares her thoughts on issues faced by the charity sector in Third Sector Magazine every other month.  

 

Governance is a popular word in our sector.  What with the updated governance code and the Charity Commission’s continued focus on good governance practices, it was only a matter of time before the governance of charity investments was considered in more detail. 

Although the structure of investment oversight varies from one charity to next, I do think that it is possible to identify common hallmarks of successful investment governance.   So we jumped at the chance to be involved in a piece of work by the Association of Chairs on ‘making board committees work’.   Borrowing the language of their briefing, successful investment governance relies on the ‘three Ps’ ; having a defined purpose; ensuring that the right people are involved; and measuring the governance performance.

For investment committees, it is useful to describe how the investment assets and committee contribute to fulfilling the mission of the charity.   What is the purpose of the investment assets, and do the investment objectives reflect this purpose?   A formal terms of reference can be useful to focus the committee on this purpose, and can help avoid time wasting.  Many successful investment committees insist that meeting papers are read and digested ahead of time so that the limited meeting time is focussed on discussion, debate and decisions rather than reading, repetition and reporting.

As with all boards and committees, it is crucial to get the right mix of people and skills.  Although tempting to fill an investment or finance committee with experts, it is valuable to have non-expert voices who should be empowered to speak up.  A committee full of experts isn’t always a recipe for success.  At its worst, expert committees can become focused on the management of the assets in isolation, becoming too separate from the mission and aims of the charity. 

Investment committees should also consider if they need to bring external voices into the conversation, when they should take advice and what functions they are delegating to investment managers.  If a charity employs a discretionary investment manager with a 5 year investment time horizon, considering monthly performance or discussing each individual stock decision is unlikely to be committee time well spent.  It is worth remembering that the Charity Commission clearly states that trustees should take advice from someone experienced in investment matters unless they have good reason for not doing so. 

The third P is performance.  If the investment committee has a clear purpose, then the success or otherwise of that committee can be appraised, both individually and collectively.  The Association of Chairs emphasise that a culture of ongoing improvement and development is helpful to maximise effectiveness.  Key objectives for the committee should be discussed with the main board, and the membership regularly examined to ensure that it is fit for purpose.

Although the ‘three Ps’ provide a useful reminder of best practise, it is worth remembering that good governance isn’t a tick box exercise.  Good governance is finding what is right in the context of your charity, helping you to maximise your impact.  A successful investment committee can do just that, ensuring long term stewardship of your charity investment assets.

Author

Kate Rogers

Kate Rogers

Head of Policy and Co-Manager - Charity Multi-Asset Fund

Kate specialises in investment on behalf of charities, endowments and foundations and joined Schroders Charities in 2005 after four years with Kleinwort Benson Private Bank Charity team.

Kate is chair of the Charity Investors' Group, which is a membership organisation providing a forum for investment debate. In this role she has collaborated with CFG to launch a guide to written investment policies and 'For Good and Not For Keeps' published by the Association of Charitable Foundations in 2013. Kate also regularly writes on charity investment in the charity sector press.

Kate is also Portfolio Director at Schroders, where she manages a common investment fund, The Charity Multi-Asset Fund, which aims to generate a regular income for charities whilst protecting the capital against inflation over the longer term. She is a CFA charterholder and has a BSc (Hons) in natural sciences from the University of Durham, is Chair of her local community foundation, and governor of her local primary school.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

Contact Cazenove Charities

Achieving your charity's investment objectives takes time and thought. To find out how we can help you please contact:

Giles Neville

Giles Neville

Head of Charities giles.neville@cazenovecapital.com
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John Clifton

Business Development Manager john.clifton@cazenovecapital.com