“Why Didn’t We Do That?”

"Why didn’t we have more money in the asset class that outperformed last year?" "Why don’t we add more money to the manager that just beat their benchmark?" "Why don’t we have a higher allocation to hedge funds in the portfolio?" These are questions that I have encountered from new committee members over the last 15 years of participating in hundreds of investment committee meetings.

The rotation of investment committee members on university, foundation, health-care and pension fund investment committees is a fact of life. Recently added members bring a fresh perspective and energy to the committee, yet in many cases they are new to the agreed upon investment structure and philosophy of the organization. Often newer committee members are quiet for the first few meetings as they try to understand the issues and committee dynamics. However, occasionally, newer committee members can be disruptive in committee meetings because they do not have the benefit of knowing why previous decisions were made.

Our CEO, Jon Hirtle, reminds us quite often that we need to be a "support group" for our clients and each other, so that we are able to stick to our discipline when allocating capital. How can we ask our trustee’s to stay the course if they do not understand the process? So an important aspect of that "support group" is educating our clients. We refer to this education process as "Trustee’s University". "Trustee’s University" is in-depth, comprehensive discussion where we review the following items:

  • Roles and Responsibilities of the Investment Committee and the Outsourced CIO
  • Long-term Objectives of the Investment Portfolio
  • Capital Allocation Process

              - When do we add to asset classes?

              - When do we cut back on asset classes?

              - How has the asset allocation changed over time?

  • Implementation of Investment Philosophy Via Specialist Money Managers

               - When do we use active management?

               - When do we use passive management?

               - When is a hybrid approach of active and passive management appropriate?

  • The Role of Alternative Investments in the Portfolio

               - Hedge Funds

               - Special Opportunities

                - Private Equity

It is important that all of our client committee members, especially the new ones, are educated on the items above, so that they have the tools to be true fiduciaries to their organizations. Through our experience, we have found that the "Trustee’s University" meeting is most effective outside of the normal quarterly meeting. Having this special meeting where the investment committee Chair and other tenured investment committee members attend with the newer committee members helps the organization maintain their strategic momentum and answer the question: "Why Didn’t We Do That?".

Mark J. Bagley, CFA

Mark is a Vice President and a Portfolio Manager with Hirtle Callaghan. Prior to joining Hirtle, Callaghan & Co. Mark worked with Deloitte & Touche, LLP as an Auditor and with CMS Companies as an Investment Analyst. Mark graduated from The Pennsylvania State University in 1994 with a B.S. in Accounting. He is a CFA charterholder and a member of the CFA Institute.


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