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May 25, 2017 Article 1 min read
Investment committee members must understand each and every underlying investment, not only on a stand-alone basis, but also the role each investment plays within the context of the total portfolio in shaping overall investment strategy.

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Executive summary

  • Investment committee members must understand each and every underlying investment, not only on a stand-alone basis, but also the role each investment plays within the context of the total portfolio in shaping overall investment strategy.
  • There is more than one way to construct an investment portfolio – most decisions come down to a matter of preference rather than “right” or “wrong.” Committees can easily go wrong by abandoning their chosen long-term investment strategy or philosophy at the first sign of trouble.
  • Committees that attempt to engage in market timing, predicting the next recession or expansion, or chasing performance are certain to struggle and are more than likely wasting their valuable time. Instead, investment committees should focus their efforts on aspects they can control.
  • Committees are responsible for establishing broad guidelines and providing oversight. To work efficiently, committees need to streamline and delegate decision-making about manager implementation and ongoing portfolio maintenance to a few key members and/or staff.
  • One underrated challenge of maintaining a successful investment program is the ability to withstand turnover among committee members. While there are plenty of valid reasons for a reasonable level of turnover, excessive changes can lead to inconsistencies in investment approach.

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