Successful investment governance
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.
Co-head of Charities
Kate specialises in investment on behalf of charities, endowments and foundations and has over 20 years of experience, with 15 years at Schroders and Cazenove. 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, Vice-Chair of her local primary school and Chair of the Finance Committee of the Cripplegate Foundation. She won a Women in Investment Award for her work with the Charity Commission and FCA creating a new charity investment vehicle.
She has researched and co-authored a series of publications on Charity investment best practise including 'For Good and Not For Keeps', which examines sustainable expenditure, ‘Intentional Investing’, which researches how charities can align their investment policy with their aims as an organisation, and more recently ‘Time and Money’, which explores how charities can make the best use of longevity. Kate was chair of the Charity Investors' Group for 12 years, standing down in 2019. In this role she collaborated with CFG and authored a guide to written investment policies. Kate also regularly writes on charity investment in the charity sector press.
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