Kate Rogers: Use the three Ps for your investment committees

Our columnist identifies common hallmarks of successful investment governance

Kate Rogers
Kate Rogers

Governance is a popular word in our sector. 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 the next, I think 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 the association's briefing, successful investment governance relies on the three Ps: a defined purpose; having the right people involved; and measuring 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? 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 meetings focus on discussion, debate and decisions.

As with all boards and committees, it is crucial to get the right mix of people and skills. Although it's tempting to fill an investment or finance committee with experts, it is valuable to have non-expert voices 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 five-year investment horizon, considering monthly performance or discussing each individual stock decision is unlikely to be committee time well spent. Remember 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, the success or otherwise of that committee can be appraised, both individually and collectively. The Association of Chairs emphasises that a culture of ongoing improvement and development can 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 practice, remember 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.

Kate Rogers is head of policy at Cazenove Charities

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